With the Fed’s re-appointment of Powell, Reuters focuses on the speed of buying a bond

Lindsay (NYSE 🙂 by Dunsmuir

(Reuters) – Federal Reserve Chairman Jerome Powell is expected to spend four more years under the leadership of the world’s most powerful central bank, focusing on himself and his political partners more likely to remove US economic emergency aid more quickly. in the face of high inflation and strong employment gains.

All the signs show that this approach is firm, as economic data on Wednesday shows the number of Americans filing new unemployment benefit claims https://www.reuters.com/markets/us/us-weekly-jobless-claims -drop-51-year -low-q3-growth-revised-slightly up-2021-11-24 last week fell to its lowest level since 1969, and said one of the most cautious heads of the U.S. central bank is open. faster removal of the stimulus in the face of “eye-catching” inflation.

When Powell was appointed https://www.reuters.com/markets/us/powell-tapped-second-term-fed-chair-2021-11-22 for a second term as head of the faith, U.S. President Joe Biden made it clear. that both the administration and the central bank would take steps to address the high costs of everyday things, including food, gasoline, and rent. In October, inflation rose at the fastest pace in 31 years, with the Fed proving that the explosion caused by the COVID-19 pandemic would be temporary.

The start of the debate among Fed officials can be seen on Wednesday when the central bank publishes the minutes of its latest policy meeting to find out how quickly they should remove the monthly asset purchase program.

Fed officials agreed at a Nov. 2-3 meeting to start reducing $ 120 billion in monthly purchases in Treasury and mortgage-backed securities — a program the Fed set up in 2020 to help protect the economy through the pandemic — with a timeline. see it completely cut off by next June.

But they left open the possibility of changing the slowdown in asset purchases, and their eyes are fixed on what should be done faster back.

“The minutes of the meeting will be carefully examined to adjust the rate of reduction of the bar,” said Sam Bullard, a senior economist. Wells Fargo (NYSE :).

Since the November meeting, economic data has revised employment gains and seen an increase in retail sales, but what has been most striking has been the level at which inflation has not fallen as Powell and others in the Fed expected. The Department of Labor’s consumer price inflation benchmark rose at a rate of 6.2% last year.

Data from the Commerce Department is expected to show another measure of the projected price rise later Wednesday morning – driven by the Fed – remains better than double the central bank’s flexible average target of 2%.

Investors are betting that the Fed will have to raise interest rates three times next year because some markets reflect the start of higher borrowing costs before May.

POLITICIAN ANXIETY

A reading of Wednesday’s political meetings is likely to provide more details on policy makers ’negative sentiment about inflation, with most stressing that the first half of the year would see a brief rise in prices as ironing out supply chain wrinkles. as the economy reopens.

“It was easy to lay off in May, but they’re taking it more seriously from month to month. And they probably feel more comfortable seeing the improvement in the labor market … the whole job is closer,” Michael Feroli said. , US chief economist JPMorgan (NYSE :).

Fed Vice President Richard Clarida will be replaced by Lael Brainard, the current member of the Fed’s Governing Board, who ends his term early next year, saying last week to give more flexibility to discussions about accelerating the bond purchase limit. The early night benchmark interest rate for the central bank will be how early it will rise from the current zero level at its policy meeting on December 14-15.

That was the last sign that policymakers are now on the path of inflationary pressures, which have intensified and spread, causing a headache for Powell, who last year reconsidered the Fed’s policy framework to prioritize his maximum employment target.

If Powell confirms his appointment to the U.S. Senate, which would begin his second term as Fed leader in February, he still expects inflation to end by the end of next year, though he said he was in the White House with Biden on Monday. That the Fed is focused on price pressures.

St. Louis Fed President James Bullard and Fed Governor Christopher Waller last week called on the Fed to remove support for buying bonds faster, for March and April, respectively.

Other patient policymakers have suggested that they are now more comfortable with an interest rate hike than previously anticipated next year, noting that the current pace of labor gains would put them on the path to nearing the Fed’s maximum employment target. 2022.

San Francisco Fed Chairman Mary Daly, who argued against the rush to remove the policy adjustment so far this week, also told Yahoo Finance on Wednesday that she would look at inflation and employment data ahead of the next meeting and “if things continue to go smoothly.” I would totally accept it. ” Daly added that despite his forecast of an interest rate hike in 2022, “I wouldn’t be at all surprised to have one or two by the end of next year.”

Inflation is not expected to begin to decline until the first quarter of next year, which means it will not be an easy solution to the inflation debate.

“In the meantime, what the Fed needs to worry about is whether this fuels wage and inflation expectations? If that’s the case, they need to move faster,” said Kathy Bostjancic, head of U.S. financial economics at Oxford Economics. .