The minutes of the Federal Open Market Committee (FOMC) meeting on September 21-22 announced by the Federal Reserve on October 13th, Eastern Time showed that participants generally agreed that if the economic recovery generally remains on track, gradually reduce debt purchases and collect them around the middle of next year. Officials may be appropriate. Participants pointed out that if the decision to initiate debt reduction is made at the next meeting, the reduction process may begin with a monthly purchase schedule that begins in mid-November or mid-December.
The minutes of the meeting show that Fed officials are struggling to deal with the uncertainty within their responsibilities. They discussed whether the labor supply will rise to 2019 levels, and continue to bet that as supply constraints in the commodity and labor markets ease, high inflation will also subside. The decision to reduce this year is also aimed at managing the risk of their wrong judgments on prices.
change
Michael Pond, director of global inflation market strategy at Barclays, said that some changes have taken place. There is a concern that temporary inflation may be turning into structural inflation. Even the doves of the committee want to ensure inflation expectations and financial conditions. Will not trigger an alarm.
Fed officials kept interest rates near zero last month, but at the same time hinted that they are about to start reducing their monthly asset purchases of $120 billion. Fed Chairman Powell told reporters at a press conference after the meeting that this process may begin as early as November and end around mid-2022.
Pantheon Macroeconomics chief economist Ian Shepherdson said that the minutes of the meeting clearly indicated that unless a catastrophic event occurs, the Fed will announce a reduction in the next FOMC meeting on November 2-3.
The minutes of the meeting show that Fed officials are facing a high degree of uncertainty in the two missions of achieving full employment and price stability.
path
Fed officials discussed an exemplary reduction path: This path includes reducing the rate of asset purchases every month, reducing U.S. Treasuries by $10 billion, and agency mortgage-backed securities by $5 billion.
According to the minutes of the meeting, Fed officials stated that this path provides a “direct and appropriate template” that they may follow.
U.S. inflation is rising at the fastest rate in years, well above the Federal Reserve’s 2% target. Some officials said that supply bottlenecks and production problems have caused inflationary pressures to last longer than expected. The US Department of Labor announced on Wednesday that the CPI in September increased by 5.4% year-on-year.
The minutes of the meeting stated: Most participants believe that inflation risks tend to be upward, and they worry that supply disruptions and labor shortages may last longer, and the impact on prices and wages may be greater or longer than current expectations.
Inflation
In addition, Fed staff stated that risks have worsened, including the possibility that “long-term inflation expectations will rise significantly and cause inflation to continue to be high”.
Fed officials predicted last month that inflation will fall to near the target level next year, but 9 out of 18 people expect the Fed to raise interest rates in 2022, which is higher than the 7 in June. The FOMC maintains interest rates close to zero and said that it will maintain interest rates until the labor market reaches maximum employment and the inflation rate is expected to exceed 2% for a period of time. Many participants emphasized that economic conditions may justify keeping interest rates at or near their lower limit in the next two years. In contrast, some participants raised the possibility of increasing the target range before the end of next year, because they believe that the threshold for raising interest rates may be reached by then.
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