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Wednesday, January 26, 2022

A senior Fed official suggests the plan to cut economic support will no longer accelerate.

On Friday, a senior Federal Reserve official suggested that he did not expect the central bank to need to act faster to complete its bond buying program than he had already announced.

“We’re completing the program pretty soon,” said John C. Williams, president of the Federal Reserve Bank of New York. during an interview with CNBC… He added that he did not see “any real benefit in trying to accelerate further – in fact, it is about improving the position of our monetary policy.”

The Fed was buying $ 120 billion in bonds every month for most of the pandemic, but announced in early November that it would begin to slow down those purchases to stop fueling the economy. On Wednesday, he said he would cut the ransom even faster in order to complete it by mid-March. This will allow Fed officials to raise interest rates, their more powerful and traditional tool, without worrying about their two policies conflicting.

Mr. Williams, who is one of the central decision-makers at the Fed, made his comment at a time when some economists ask why the central bank is still buying bonds at all when inflation is so high. But he said the purpose of the acceleration was to create “non-commitment” – the ability to respond to inflation at a faster pace if necessary – without moving so dramatically that it would disrupt markets.

Fed officials also revised their expected interest rate dynamics at their meeting this week. The rates are set to near zero, but the latest projections show three increases in 2022 and suggest that the federal funds rate could rise to 2.1 percent by the end of 2024. This will make borrowing for mortgages, care loans, and business expansion more expensive. slowdown in the economy.

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Mr. Williams made it clear that the timing and pace of rate hikes the Fed is using to ensure growth doesn’t overheat, keeping inflation high and potentially pushing it out of control, will depend on economic progress.

“It will depend on the data,” he said, adding later: “I am pretty optimistic, we are seeing strong improvements in the labor market.”

He said he didn’t believe the Fed would be forced to trigger a recession to bring inflation down as it has historically — as Lawrence H. Summers, a former treasury secretary and current economist at Harvard, pointed out in a new column.

Inflation is now at its highest level since 1982, but the reasons for the sharp rise in prices were unusual and related to a halt at a pandemic level and the subsequent resumption of work, according to Mr. Williams. This is what sets the dynamics apart.

“It’s a unique set of circumstances,” he said, pointing out the bizarre supply chain impact of the pandemic that has driven the price of durable goods up. He said the historical episodes are “probably not the best guide.”

World Nation News Deskhttps://www.worldnationnews.com
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