Currently, the Fed goes to the markets every month to buy $ 120 billion in assets – through two government bond programs and mortgage securities – and according to the latest monetary policy meeting, the Fed’s objective is to abandon net purchases in June 2022. From there you must decide on what date to start and how much to reduce each month. The September minutes included a possible plan that contemplates 15,000 million reduction in purchases per month. Thus, to complete these operations it will take eight months and, with the goal of June on the table, it should start in November.
In the US, the data of September inflation climbed to 5.4%, the highest since 2008 and slightly above expectations. The main upward pressure on the September CPI came from the cost of housing (3.2% compared to 2.8% in August), a sign of an overheating in the US housing market. This is influenced by the acquisitions of mortgage securities by the Fed, US $ 40,000 million a month and which will be reduced by US $ 5,000 million every thirty days, according to the plan that was discussed at the last meeting.
According to the latest FED forecasts, published in September, inflation in the US will close the year 2021 at 4.2%, while for next year it will fall two percentage points, to 2.2%. This percentage will remain in 2023 and in 2024 it would decrease slightly to 2.1%, according to the forecasts. For these projections, it uses the Personal Consumption Expenditure (PCE) price index, instead of the CPI, which reports higher inflation. Currently, it stands at 4.3%.
The scenario for 2022 is faltering, the main central banks already recognize that inflation will last longer than expected. And in this scenario, “it increases the risks that long-term inflation expectations will be adjusted upward,” said Tiffany Wilding, an economist at PIMCO, who sees a “significant risk that rate hikes will come ahead.” From ING they go further and anticipate that in 2022 there will already be at least two rate hikes, including a third from July.
The economies of the world are experiencing a key moment: the macroeconomic scenario is similar, with a slowdown in growth. The risks, in addition to inflation, are driven by the economic reopening that has resulted in mismatch between supply and demand. As a result, bottlenecks in supply chains, semiconductor crises, increased raw materials and labor shortages have slowed growth in recent months, while pushing prices up.
Source From: Ambito
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