- Fed Gets Closer to Asset Buying Move
- Markets Await Fed Chairman Powell’s Statements
- If the Economy is Threatened by Lockdowns, Australia’s Central Bank is Prepared to Respond
Fed Gets Closer to Asset Buying Move
It was stated that Fed members are approaching a consensus on starting to reduce their asset purchases, which are currently $120 billion per month.
Boston Fed President Eric Rosengren stated that he favored reducing purchases of mortgage-backed securities before Treasury paper purchases and that he would support the completion of purchases by mid-2022 if strong economic growth continues. He added that due to the current supply shortages, the FED’s asset purchases are of no use. However, Rosengren has no voting rights this year.
San Francisco, Boston, Dallas, and St. Louis Fed presidents gave their support for the reduction in asset purchases to begin within 3 months at the latest and for the purchases to be completed by mid-2022.
St. Louis Fed President James Bullard argued that the Fed should start reducing its Treasury paper purchases by $20 billion monthly and purchases of mortgage-backed securities by $10 billion next month, while demanding that the purchases be completed by March 2022.
Markets Await Fed Chairman Powell’s Statements
In a virtual town hall discussion with teachers and students this afternoon, Fed Chair Jerome Powell will share his assessment of the US economy and monetary policy. President Powell will answer questions from attendees from around the country who will attend the meeting virtually. There’s no guarantee Powell will say anything about monetary policy during the town hall, but there’s a chance he’ll say further development in the labor market is needed before a taper. He will, however, likely wait until next week’s Jackson Hole meetings to make his decision on the timing and extent of the planned reduction of quantitative easing.
Before these developments, it was seen that the worse than expected macroeconomic data in China and the USA, the number of new types of coronaviruses (Kovid-19) cases that continue to increase, and the geopolitical risks originating from Afghanistan created selling pressure in the global stock markets.
The market may be underestimating the town hall “given it’s for educators and we’ll have Jackson Hole next week,” said Kengo Suzuki, chief FX strategist at Mizuho Securities Co. in Tokyo. “There’s a good chance that Powell will take the opportunity to prime the market for what will come in Jackson Hole.”
Investors are also looking forward to the annual central bank meeting, hoping for updates on Fed policy and whether the strong July employment report will push bond tapering forward.
If the Economy is Threatened by Lockdowns, Australia’s Central Bank is Prepared to Respond
Australia’s government extended the region’s lockdown, which was due to end on Thursday. The Reserve Bank of Australia (RBA) said it would be “prepared to act” should Australia’s current COVID-19 crisis deepen.
Governor Philip Lowe has maintained his optimism for Australia’s economic recovery, but the nation’s economic future has been clouded by the growing Delta variation crisis.
AS the Delta variation spreads, pressure on the Reserve Bank of Australia (RBA) to delay or perhaps lessen a scheduled tapering of its bond-buying program grows.
Officials try to halt the spread of the Delta version and Melbourne has been placed under curfew. Two-thirds of the country’s 25 million people are effectively shut out, and whole retail and service industries have shut down.
“Right now, we are in the middle of the highest number of cases that I hope we experience,” ACT Chief Minister Andrew Barr said on Tuesday.
Economists have lowered their economic forecasts in response, making the RBA’s recent promise of 4% growth for this year more unrealistic.
“Lockdowns are likely to have a very acute impact on the economy, much more than what the RBA had penciled in only a week ago,” said National Australia Bank economist Tapas Strickland.
By the conclusion of the year, the RBA predicted a 5% unemployment rate.