The rapid spread of Delta in the U.S. complicates the Fed’s “scaling timeline”
Federal Reserve Update
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Jump in Coronavirus cases In the United States, the timetable for the Fed’s cancellation of economic support is further complicated as it weighs the potential impact of the return of the virus on economic growth with the recent Inflation burst.
The Federal Open Market Committee of the Federal Reserve is expected to maintain interest rates close to zero at the end of Wednesday’s meeting, but policymakers also said they will step up negotiations on when to start cutting interest rates or when to start. “Tainized” $120 billion in asset purchases per month.
The committee will release the latest statement with Federal Reserve Chairman Jay Powell at 2 pm on Wednesday, and a press conference will be held shortly thereafter.
Pantheon Macroeconomics chief economist Ian Shepherdson said: “The Federal Reserve will recognize the continued growth of economic activity, but we expect the statement to point out that the rapid spread of the Delta variant poses a threat, especially in states where vaccination rates are still low.”
He added: “At this point, the damage to the national economy seems to be small and does not require any response. But if the growth rate of cases in the delta outside the South also increases exponentially, the situation will change.”
Last month’s meeting marked a significant increase in the Fed’s growth expectations for this year. But officials must now consider whether the surge in infections related to the Delta variable will be a drag on the economy, which means they should postpone the cancellation of currency support.
The soaring infection rate, especially the unvaccinated infection rate, prompted U.S. health officials to take a big turn on Tuesday regarding mask wear recommendations for people who have been completely stabbed. The US Centers for Disease Control and Prevention stated that vaccinated people should now cover their faces in indoor areas with high Covid-19 levels.
The Fed has been debating whether to start “scaling down” bond purchases as the first step to lift the strong support for the economy at the beginning of the pandemic.
The high inflation data in recent months has increased the pressure on the US Central Bank to speed up the realization of this goal and eventually begin to increase its main interest rate, which is between 0% and 0.25%.
But the new increase in coronavirus infections may lead to greater caution, especially if it leads to a reduction in consumer activity and the reintroduction of restrictions aimed at curbing the spread.
Powell has repeatedly emphasized that economic recovery is closely related to the trajectory of the pandemic. Before the Delta variant spread in the United States, he and other Fed officials were more optimistic about the economic prospects of the United States. Economists expect the Fed to resume a more sober assessment on Wednesday.
Since the last FOMC meeting in June, although Fed officials indicated in their forecasts that interest rates were raised earlier, US Treasuries have risen.Some investors attribute the decline in U.S. Treasury yields to concerns about U.S. economic growth May be hit Due to the new leap of coronavirus infections.