From the
Breitbart News Network, today:
Federal Reserve Chairman Jerome Powell and the rest of the Federal Open Market Committee managed to thread the monetary policy needle Wednesday.
Their official statement was nearly unchanged from the last meeting, providing a reassuring sign of stability to the market.
Yet they acknowledged that the economy had significantly improved, preserving their credibility as clear-eyed analysts of the economy. And they still managed to sound as if they were no nearer to "tapering" their $120 billion in monthly bond purchases, much less raising rates.
In his press conference, Powell emphasized that the Fed believes that current inflationary pressures are transitory and any spike in prices over the coming months will not lead to sustained inflation. He made it very clear that a spike in inflation above the two percent target this year will not trigger a rate hike. Instead, the Fed will keep up the bond buying until there is "substantial further progress" toward full employment. It's not even time to talk about talking about slowing the purchases, Powell said. Rates will not rise until we reach both full employment and average inflation over time of two percent, which translates into inflation running above two percent for some time to make up for undershooting for so long.
That seemed to satisfy markets on Wednesday. Stocks moved down a bit, and bond yields inched up but not significantly. Nonetheless, many market watchers still are anticipating that inflationary pressures will force the Fed's hand earlier than the Fed expects.
One thing that could drive that is the combination of President Biden's infrastructure plan and his "American family" plan, the latter of which will be unveiled a few hours from now at Biden's first joint address to Congress. That would add $1.9 trillion of new spending on top of the $2.3 trillion for all the things they are calling infrastructure. Could that be enough to get inflation going? Unfortunately, we may find out.
– Alex Marlow & John Carney
Breitbart News Network
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