A complete recap of Federal Reserve officials` decision
On Wednesday, Federal Reserve officials informed economists and investors on thinking and dealing with employment and inflation in the United States. The central bank chose not to increase interest rates from the adjusted pace at which it gets government bonds every month.
Investors are trying to pay attention to how Chairman Jerome Powell characterizes the economic outlook after the spread of the delta variant. Besides that, there is also its timeline for reducing its bond purchases per month.
Powell said the U.S. economy remains a good deal apart from making significant progress toward the Fed’s mandates of maximum employment and stable prices.
On Wednesday, Powell said that they have some possibilities to cover on the labour market side. He added that they are far from having substantial further progress to the maximum employment goal.
No mortgage-backed cuts
On Wednesday, Chair Jerome Powell said that the Federal Reserve is not planning to cut its purchases of mortgage-backed bonds. At least, it will not happen until its overall tightening process starts.
Some economists and analysts questioned why the Federal Reserve is purchasing billions of mortgage-linked assets every month. This seems to make no sense as home prices are surging at the moment. Powell stated that he didn’t think buying those assets had a significant influence on the housing market outside of the more comprehensive accommodative strategy from the central bank.
Powell said that he sees little support for the idea of decreasing mortgage-backed securities before Treasurys. He added that once the process began, there was some support for decreasing the mortgage-backed securities faster than Treasurys.
Economist said that Federal Reserve started the tapering
Chief Economist Gus Faucher said that the central bank began the countdown to tapering.
Furthermore, he wrote that the FOMC started the tapering clock with its July statement. The committee said that the economy developed toward its employment goals. However, it was not substantial further progress before it began to reduce its long-term assets purchases.