The prominent point in Powell’s discourses in the multivariate world where it is difficult to establish a policy ground; Acknowledging the necessity of retiring the phenomenon of “temporary inflation”… This will also bring the Fed to a certain stage in discussing how to finish QE faster. Therefore, in order to protect itself from the toxic effects of reflationist policies, it seems that this time it will move towards an implementation where less assets are taken to control inflation and then more stringent conditions will be adopted.
While Powell admits that inflation is not so “temporary”; It is very clear that the Fed is not at the same point between the beginning of the pandemic and the end of the pandemic. Because, while the collapse of demand experienced with the outbreak of the pandemic suddenly fueled the fears of deflation; A certain amount of revival was achieved with ultra-loose liquidity. After the market was revived with incentives, organic phenomena in the recovery increased as the effect of the epidemic decreased, as vaccines came out and economic openings took place. However, the aftershock of the crisis appeared at the stage of supply shortage. At this point, inflation, which tends to increase excessively and distorts pricing, comes into play at this point. Rate hikes in the medium term are still not the subject of the day. The Fed’s current practice is to reduce asset purchases, to do so more quickly if necessary, and to replace redeemed bonds on the Central Bank’s balance sheet.
Bond yields have directly responded to Powell’s comments. While the Fed’s main menu is like this; The factor that blurs the situation is the emergence of Omicron…
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Hibya Haber Ajansı
Kaynak: Hibya Haber Ajansı