Federal Reserve officials were optimistic about the economy at their April political meeting and tiptoed to talk about recall support for the economy as government support and the reopening of stores fueled consumer spending and paved the way for one Paved recovery.
Fed policymakers have said they need to see “significant” further progress toward their inflation targets, which averaged 2 percent and full employment over time, before slowing monthly bond purchases by $ 120 billion. The purchase is said to continue to borrow and support demand, accelerating the recovery from the pandemic recession.
Officials said “it would likely take some time” to meet their desired standard, minutes of the April 27-28 meeting of the central bank released Wednesday showed. However, they noted that “a number” of officials said “if the economy continues to make rapid progress towards the committee’s objectives, it may be appropriate in upcoming meetings, at some point to discuss a plan to adjust the pace of purchases.” to start from assets. “
Confusing and sometimes conflicting data released since the April 27-28 meeting could make it difficult for the Fed to assess when to withdraw support or even speak seriously about it. A report on the labor market showed that employers created far fewer jobs than expected. At the same time, an inflation report showed that expected price increases will occur faster than many economists had expected.
In addition to its bond purchases, the Fed has also kept interest rates close to zero since March 2020.
It was clear to officials that they wanted to slow down bond purchases first, while interest rates remained at rock bottom until annual inflation fell sustained above 2 percent and the labor market returned to full employment.
Markets are extremely aligned with the Fed’s plans for bond purchases, which tend to keep asset prices high by allowing money to flow through the financial system. Central bankers are therefore very cautious when discussing their plans to curtail these purchases. They want to give a lot of signal before changing policies to avoid stocks or bonds spinning.
Stocks lashed in the moments after the 2pm release and fell in the moments after before rebounding. The yield on the 10-year Treasury note rose to 1.68 percent.
Even before the latest labor market report showed a slowdown in employment growth, Fed officials thought it would take some time to reach full employment, the minutes showed.
“Participants judged the economy to be far from meeting the Committee’s broad and comprehensive objective for maximum employment,” the minutes read. Officials also noted that business leaders reported recruitment problems that have since been blamed for the slowdown in employment growth in April. This is “likely due to factors such as early retirement, health concerns, responsibility for childcare and extended unemployment insurance benefits”.
Regarding inflation, Fed officials have repeatedly stated that they expect prices to continue falling temporarily. It makes sense that data is very volatile, they said: the economy has never opened again after a pandemic. This message was repeated throughout the April Protocol and has been repeated by officials since then.
“We expect inflationary pressures to likely rise over the course of next year – certainly in the coming months,” said Randal K. Quarles, Fed vice chairman for oversight, during a statement in Congress on Wednesday. “Our best analysis is that these pressures will be temporary, even if significant.”
“But if it turns out that’s not the case, we can respond to them,” added Quarles.
