The Fed gives a more rosy picture of the American economic recovery


The Federal Reserve has upgraded its view on American economic recovery, but kept interest rates close to zero and showed no signs of moving to remove support for the economy.

At the end of the two-day meeting, officials noticed an improvement in the economy and provided a brighter picture than they had in March.

“Amid progress in vaccination and strong political support, economic activity and employment indicators have strengthened. The sectors most unfavorable to the pandemic remain weak, but have shown improvement, ”said the Federal Open Market Committee.

The Fed went on to say that the economic path would “significantly depend on the course of the virus,” and the public health crisis created “risks” to the economic outlook. However, in March, the US Federal Reserve described pandemic risks as “considerable”- an adjective he removed on Wednesday.

The Fed has maintained its ultra-light monetary policy. It kept the federal fund rate, its main interest rate, at a target range between 0 and 0.25 percent and said it would continue to buy $ 120 billion in debt a month.

The Fed has set a high ladder to start slowing the pace of asset purchases, saying “significant further progress” should be made over time toward its full employment and average inflation targets of 2 percent. The U.S. labor market still lacks 8.4 million jobs from pre-employment levels, and inflation is such an increase is expected in the coming months, Fed officials do not expect this to take place.

In a statement Wednesday, he acknowledged that inflation had risen, but reiterated that “transient factors” were “largely” reflected. Bond and stock markets changed little after the statement and ahead of Fed President Jay Powell’s press conference.

Despite assurances from Fed officials that they would have a “patient” approach when considering changes in their monetary policy, investors began to speculate when the central bank could be forced to start withdrawing support.

Euro-dollar futures, a measure of interest rate expectations, now indicate that the Fed will increase rates by early 2023, almost a year earlier than proposed in the central bank’s latest forecasts, released in March.

Some market participants reckon the Fed could start talking about narrowing its asset purchases as early as June, while others expect it to hold on until the second half of this year.

“[Fed] politics is currently on autopilot, because only when you get to October, November and December, when you start getting price data, are you comfortable, are they informed of the current inflation trend, ”said Jason Thomas, head of global research at Carlyle Group.

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