After a sharp decline in economic activity and employment in recent months has risen slightly, but remain significantly below the levels of the beginning of the year, indicates fed. Weak demand and a significant decline in oil prices holding back inflation. Overall financial conditions in recent months have improved, partly reflecting measures taken to support the economy and growth of lending to households and enterprises, said in a release.
the Future prospects of the U.S. economy will depend on the development of the situation with coronavirus, says the fed. A pandemic will significantly affect economic activity, employment and inflation in the short term, and poses significant risks to the economic Outlook in the medium term, follows from the statements of the regulator. Save the zero rate, the fed expects until then, until it is confident that the economy experienced the events, and is on track to achieve the objectives of maximum employment and price stability.
To support lending to households and businesses, the fed in the coming months will continue to buy Treasury and mortgage bonds at least at current volumes, said in a release.
the fed’s Balance sheet over the last weeks practically has not changed and now is just under 7 trillion dollars, the analyst of “VTB Capital” Neil McKinnon. The main factors that influenced the fed’s balance sheet and is considered a measure of market liquidity were the reduction in demand for repo operations in the context of normalization of short rates in the money market (due to the fact that the probability of recurrence occurred in September of last year the deficit of dollar liquidity is now much reduced), as well as the demand for the dollar from foreign Central banks through currency swaps with the fed.
Now the fed provides the market with liquidity through purchase of Treasury bonds (20 billion dollars a month) and mortgage bonds (40 billion dollars a month). At some stage the Fed will have to increase purchases of Treasury bonds in the light of the forthcoming increase in their placement, says McKinnon.
it is Expected that the fed will complete its revision of the instruments of the monetary policy by September. Until now, the regulator resisted the introduction of negative interest rates and control the yield curve. It seems that the fed is more inclined in favor of a more fine tuning of forward guidance, which means the flow of the markets signal that the regulator is ready to allow the exceeding of the inflation target, but in order to begin to taper quantitative easing or raise the fed funds, it is necessary that the rate dropped below a certain level, says McKinnon. Some commentators believe that by 2025 no W��GOV in the direction of tightening monetary policy will not be done, points out the analyst.
