MESSAGE
| DATE | 2021-02-17 |
| FROM | Ruben Safir
|
| SUBJECT | Subject: [Hangout - NYLXS] Coming economic troubles
|
reuters.com
Fed minutes highlight willingness to steer past coming inflation
Howard Schneider, Ann Saphir
5-6 minutes
WASHINGTON (Reuters) - Facing a still-scarred economy that may need an
extended time to recover fully, Federal Reserve officials last month
debated how to lay the groundwork for the public to accept coming higher
inflation, and also the need to “stay vigilant” for signs of stress in
buoyant asset markets, according to minutes of the U.S. central bank’s
Jan. 26-27 policy meeting.
FILE PHOTO: The Federal Reserve building is pictured in Washington, DC,
U.S., August 22, 2018. REUTERS/Chris Wattie
In discussions that ranged from the public’s perceptions of inflation to
the vagaries of Robinhood-type retail stock trading platforms, Fed
officials said they were still prepared to keep their easy monetary
policy on track to help heal an ailing job market.
With a jump in some prices expected this spring, “many participants
stressed the importance of distinguishing between such one-time changes
in relative prices and changes in the underlying trend for inflation,”
according to the minutes, which were released on Wednesday.
“A number of participants” said they saw such price increases on the
horizon for goods “whose production has been subject to supply chain
constraints, or soon could be; others anticipated that a possibly abrupt
return to normal levels of activity could result in one-time increases
in certain prices,” the minutes stated as the central bank wrestled with
how to prepare for a post-pandemic reopening.
The United States remains under siege from the health crisis, but with
new vaccines being distributed and inoculations running at more than 1.5
million daily, the economy is expected to run hotter this year.
This week, major food producers said they were mulling possible price
hikes, and data on Wednesday showed producer prices jumped by the most
in more than a decade last month.
Fed officials, determined to restore the job market and push inflation
to 2% on a persistent basis, plan to ignore all that.
In the drive to explain why to a public typically sensitive to the
prices of basic goods like food and energy, “participants emphasized
that it was important to abstract from temporary factors affecting
inflation” and more persistent price trends that the Fed tries to
target, the minutes showed.
In debate over the pandemic’s endgame, others were concerned about the
potential for stress to bubble up in the financial system.
“A few participants stated that it would be important to stay vigilant
to ensure that the banking system remained strong and resilient,” with
“some participants” noting the boom in initial public offerings of
stock, and rising asset values “that might have been affected by retail
investors trading through electronic platforms.”
GAME STILL ON
The dramatic rise and crash of GameStop and other “meme” stocks is the
topic of a congressional hearing this week, and also raised concerns the
Fed’s loose money policy, used to nurse the economy through the
pandemic, may also be fueling a damaging asset bubble.
Similarly the hundreds of billions of dollars of federal fiscal payments
last year and under debate for coming months have been needed to keep
families afloat, but also represent “upside risks” if consumers spend
more freely than expected in a reopened economy.
Still, Fed officials said, the premium was on keeping support for the
economy in place.
“Participants observed that the economy was far from achieving the
Committee’s broad-based and inclusive goal of maximum employment and
that even with a brisk pace of improvement in the labor market,
achieving this goal would take some time,” the minutes said.
The Fed made few changes to its policy statement at its meeting in
January, and did not issue new economic forecasts.
The Fed next meets on March 16 with a policy decision and new economic
projections to be issued the next day.
The U.S. central bank has pledged to keep its key overnight interest
rate near zero until inflation is “on track to moderately exceed” its 2%
target and the job market is approaching “maximum employment” - a
promise likely to keep rates low for years to come.
In addition, the Fed has promised to continue purchasing $120 billion of
government bonds per month until there has been “substantial further
progress” towards its inflation and employment goals.
Given the economy’s halting progress in recent months, that may mean Fed
policy stays largely on hold for an extended period, and officials in
recent public statements have emphasized they are in no rush to shift
away from crisis-fighting mode.
“We’re going to be patient,” Fed Chair Jerome Powell said at a news
conference after the end of last month’s policy meeting. “We’ll seek
inflation moderately above 2% for some time ... The way to achieve
credibility on that is to actually do it. And so that’s what we’re
planning on doing.”
_______________________________________________
Hangout mailing list
Hangout-at-nylxs.com
http://lists.mrbrklyn.com/mailman/listinfo/hangout
|
|
