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Fed Chairman Jerome Powell
Photo: POOL / REUTERS
In view of high inflation and solid economic growth, the US Federal Reserve is initiating the exit from its enormous aid programs to deal with the corona crisis.
The Federal Reserve (Fed) announced on Wednesday that it would reduce its economic asset purchases from November: Instead of the current $ 120 billion a month, the volume will in future be $ 15 billion less.
However, nothing will change in the key interest rate for the time being.
It is in the extremely low range of 0.0 to 0.25 percent.
With the bond purchase program, the Fed is pumping additional money into the financial markets to keep lending rates low and stimulate the economy. The Fed had already prepared investors for the reduction in volume. The throttling is likely to continue gradually in the coming months in the same order of magnitude, so that the program would expire in June 2022. However, the central bank reserves the right to adjust the pace depending on economic developments.
The players on the US stock markets reacted calmly to the monetary policy decisions ahead of the press conference by Federal Reserve Chairman Jerome Powell. Investors hope from Powell's remarks how the Fed is positioning itself on persistently high inflation and what signals it is sending about the possible schedule and pace of interest rate hikes. In its statement, the Council of Central Bankers emphasized that the higher inflation in the US was primarily due to temporary factors.
The Fed reacted to the corona crisis with an extreme easing of its monetary policy. In the meantime, however, the central bank is under pressure to tighten this again. The inflation rate in the US rose to 5.4 percent in September and, as in June and July, reached the highest level since 2008. Inflation is thus well above the central bank's target of two percent. In view of high energy prices and persistent supply problems in world trade, it is becoming increasingly clear that increased inflation is not a relatively rapidly passing phenomenon, as the Fed initially assumed.
Meanwhile, the US economy has largely recovered from the crisis.
In the summer months, growth lost significant momentum due to supply bottlenecks in the industry and the increasing number of corona cases.
But the situation no longer seems critical.
For example, job creation in the private sector seems to have accelerated unexpectedly in October, according to data from the labor market service provider ADP.
The broader labor market report of the US government on Friday will provide more in-depth knowledge.
fdi / dpa
