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US Federal Reserve: Change of course in monetary policy possible


Once again, the US Federal Reserve is leaving the key interest rate close to zero - but there could be an increase as early as next year. The monetary authorities also announced that the massive asset purchases would soon be shut down.

Enlarge image

Fed Chairman Jerome Powell (archive image)


Susan Walsh / AP

The US Federal Reserve (Fed) is sticking to its ultra-loose monetary policy despite high inflation.

It left the key rate in the range of zero to 0.25 percent on Wednesday.

However, the monetary authorities indicated in their outlook on average that there could be an increase as early as next year.

So far, they had only targeted a turnaround in interest rates a year later.

At the same time, the central bankers expect inflation to rise to 4.2 percent this year - more than twice as high as the Fed is aiming for.

The Fed will also continue to buy $ 120 billion per month in securities.

At the same time, the central bank signaled that purchases could soon be scaled back.

At the end of July, with a view to the bond program, the Fed had already announced that the US economy had made progress on the goals of full employment and inflation.

If the development continues as before, "a moderation in the pace of securities purchases will soon be justified," said the bankers' announcement.

Fed chairman Jerome Powell had already announced a shutdown of massive securities purchases for this year, but had not yet presented a schedule.

The current interest rate level, meanwhile, is appropriate until there is full employment in the labor market and the inflation target of around two percent has been reached, the Fed emphasized after a meeting of the responsible money market committee.

The European Central Bank (ECB) recently announced a slight curtailment of its bond purchase program.

Growth forecast for 2021 lowered

At the same time, the Fed lowered its growth forecast for this year.

In June, the central bank had assumed an increase of 7 percent, now it expects growth of 5.9 percent, as the forecasts published on Wednesday show.

The rapid recovery of the US economy from the corona crisis had recently slowed down somewhat due to the rapid spread of the delta variant.

For 2022, the central bank now expects growth of 3.8 percent after the June forecast of 3.3 percent.

Most recently, the central bank's growth forecasts have mostly reflected the development of the pandemic.

Last December, before the vaccinations were used, the central bank had expected an increase of 4.2 percent for 2021.

In March it was already 6.5 percent, in June - thanks in part to the lower number of infections and the increasing vaccination rate - it was already 7 percent.

Since June, the number of infections and deaths has risen again because of the delta variant.

sol / dpa / Reuters

Source: spiegel

All business articles on 2021-09-22

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