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The United States Federal Reserve added a new threat to the economic recovery: the new variant of the coronavirus. At the same time, he announced that in December he will define the withdrawal of the multimillion-dollar bond purchase program in search of containing the highest inflation in three decades.
It came to stay. The highest inflation in three decades in the United States would be more “persistent” than the monetary authorities of that country expected. This was confirmed by Jerome Powell, the president of the Federal Reserve (Fed).
In fact, Powell said it is the “right time” to stop using the word “transitory.” Year-on-year inflation in the United States for October was 6.2%, the highest in 30 years. Powell confirmed the data before the banking committee of the US Senate, an appearance in which he was accompanied by the Secretary of the Treasury, Janet Yellen.
“The threat of persistent high inflation has grown,” acknowledged Powell, after months of stating that inflationary pressure would be “temporary” and “transitory”, while evaluating anticipating the withdrawal of the bond purchase program.
“The economy is very strong and inflationary pressures are high, and therefore it is appropriate in my judgment to accelerate the completion of our bond purchases perhaps a few months earlier,” Powell said.
“Reading between the lines, it appears that Powell is now dramatically more concerned about the risk of sustained inflation,” Matt Weller, director of global research for investment platform FOREX, analyzed in a note to clients.
During the last meeting of the Fed, interest rates were left unchanged, which range between 0% and 0.25%, but now the reduction of liquidity injections by 15,000 million dollars per month is a reality . The volume of monthly bond purchases of $ 120 billion began with the pandemic but would be progressively reduced with the goal of ending the program by mid-2022.
The announcement of the withdrawal of the stimulus caused sharp falls in financial markets. The Dow Jones, the main indicator on Wall Street, fell to 1.8% in the middle of the day, as did the European stocks.
Beyond the problems in the supply chain and inflation, the United States central banker assured that there is concern about the economic impact of the Omicron variant of the coronavirus.
“Increased concern about the virus could reduce people’s willingness to work in person, slowing progress in the job market and intensifying problems in supply chains,” Powell added.
The next Fed meeting is scheduled for December 14-15. In it, the presentation of the macroeconomic forecasts is expected, which in September stood at a growth rate of 5.9% and an inflation of 4.2% by the end of 2021, but which will be revised due to the weight of recent events .
With EFE
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