Does the Fed dare to scale down?


Does the Fed dare to scale down?

When Fed officials convened the most recent two-day monetary policy meeting on Tuesday, the issue of whether the central bank should start discussing the reduction of its $120 billion monthly bond purchase program will be on the agenda.

Since the Fed’s last meeting in late April, several senior Fed policymakers, including Vice Chairman Richard Clarida, have opened their doors to discuss the final Slow down These include U.S. Treasury bonds and institutional mortgage-backed securities.

The most recent comments are consistent with those cited in the minutes of the Fed’s latest meeting, which indicated that “some participants” thought it might be appropriate “at some point in the upcoming meeting” Start thinking about these plans If we continue to make progress towards the central bank’s goal of a more inclusive recovery from the pandemic.

Recent economic data supports this timetable.Consumer prices in the U.S. are rise rapidlyThe CPI report last Thursday showed that May increased by 5% year-on-year-the largest increase in the past 13 years.In addition, last month Work numberAlthough weaker than expected, it still shows signs of improvement in the labor market.

Most investors still expect the Fed to only start to scale down in early 2022, and provide more detailed guidance on specific methods by September this year at the latest. Goldman Sachs is expected to issue a more formal announcement in December and will not raise interest rates until early 2024.

“The Federal Reserve has signaled that they will start discussing this matter,” said Alicia Levine, chief strategist at Bank of New York Mellon Investment Management. “They are softening market expectations [something] this summer. ” Colby Smith

Are inflation risks in the UK rising?

Due to sluggish demand for goods and services and weak wage pressures, consumer prices in the UK have increased at an annual rate of less than 1% for most of the pandemic.

However, as the recent relaxation of Covid-19 restrictions released pent-up consumer demand, the country’s headline inflation figures in April doubled from the previous month.

When the core consumer price inflation data for May was released on Wednesday, some analysts expected a bigger leap, predicting that the annual CPI growth would jump to the Bank of England’s 2% target.

Robert Wood, chief British economist at Bank of America, said that such a surge in inflation will exacerbate the Bank of England’s tough attitude. He also predicts that prices will rise further later this year, as rising commodity prices continue to push up energy and food costs.

Additional price pressure will come from Supply chain disruption Higher transportation costs push up input costs.

“The upside risks of our inflation forecast are increasing from all angles,” said Paul Dales, chief British economist at Capital Investment Macros, who expects consumer price levels to reach a peak of 2.6% in November.

Dales added: “The reopening may cause the prices of bars and restaurants to rise faster than we expected,” and labor shortages in some industries, such as construction and hotels, have also begun to push up wages and prices.

However, both analysts expect the increase in price pressure to be temporary.

“Once the rise in commodity prices affects consumer prices, inflation will fall again,” Wood said, predicting that UK inflation will fall below the Bank of England’s target by the end of 2022. Valentina Rome

Will the Bank of Japan maintain interest rate policy?

Japan’s economic recovery this year is different from that of Europe and the United States because it is struggling with the Covid vaccination campaign, and due to the pandemic, Tokyo and other major cities continue to be partially blocked in a state of emergency.

Although last Thursday, Japan’s wholesale prices rose at the fastest annual rate in 13 years due to soaring commodity costs, but compared with the United States, Japan faces less price pressure in other areas.

This means that when the Bank of Japan ends its two-day meeting on Friday, analysts believe it will not change monetary policy.

“I don’t expect any changes in policy,” said Harumi Taguchi, chief economist at IHS Markit in Tokyo. “They added flexibility in March, and I expect they will continue to focus on this.”

After a policy review, the Bank of Japan in March Canceled its promise With an average annual purchase of 6 trillion yen (54.8 billion U.S. dollars) of stocks, the purchase rate of its exchange-traded funds dropped significantly in April and May. These moves marked a shift from aggressive monetary stimulus to support the Bank of Japan’s so-called more “sustainable” policies.

John Vail, chief global strategist at Nikko Asset Management, said: “Japan is one of the few countries where real estate prices have not risen. Since rent is a major component of the consumer price index, significant inflation is unlikely in the future.” In Tokyo.

“Interest rates may remain extremely low, which in turn puts the yen in a weakening trend,” Weir added. Robin Harding

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