The Fed left interest rates unchanged at its last public meeting this year. The content of the statement has changed only in the clause of redemption of bonds. Instead of the previous promise “to buy in the next months”, the phrase “until the significant economic growth is noticed” appeared.
Along with that, the monetary regulator refused to buy long-term bonds. The volume of $120 billion will still apply to short-term bonds. Perhaps this is the only surprise that the committee has presented. Economists expected the Fed to listen to them and start buying longer-term bonds.
As for the forecasts for economic growth, they have been improved. The GDP growth in 2020 is expected to be at the level of -2.4% against -3.7% in the September forecast. For 2021, estimates have been raised by 4.2% from 4.0% earlier. Unemployment may fall to 5.0% (September forecast assumed 5.5%). Also, the projection assumes an increase of inflation to 1.8% from the expected 1.2% this year. The horizon of the rise in interest rates won’t be visible earlier than in 2024. At this point, the projection remains unchanged.
At a press conference, Jerome Powell described the following months as difficult ones for the economy of the country. But at the same time, he did not give the cue of the likelihood of a more aggressive QE program.
The market reacted frankly ineffectually to the statements. The dollar index is trading almost unchanged at the level of 90.315 (-0.10%). Bond yield remained unchanged: the US Treasuries – 0.928%, 2-year bonds – 0.121%.
The stock market is trading in different directions:
Dow Jones 30.169.41 -29.90 -0.10%
S&P 500 (F) 3.696.12 +9.12 +0.25%
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.Open Account