The US Federal Reserve (Fed) forecasts that it will not raise interest rates until 2023 and is committed to maintaining a measure of buying at least $ 120 billion of bonds per month.
During the two-day Fed meeting, most of the agency’s officials said they did not want to raise interest rates until 2023. The Federal Open Market Commission (FOMC), the policy-making body of The Fed has voted to keep short-term lending rates stable at close to 0%, while continuing its asset purchase program, in which the Fed will buy at least $ 120 billion worth of bonds per month.
The FOMC also reaffirmed that it will target inflation at a moderate level above 2% for a while and expect long-term inflation to remain at 2%. Fed officials believe inflation will reach 2.1%, well above their 2% inflation target by 2023.
In a statement, the Fed said: “Indicators of economic activity and employment have increased in recent times, although sectors have been most negatively affected by the epidemic of acute respiratory infections COVID- 19 is still weak. ”In addition, the Fed also gave a more positive economic forecast, accordingly, the Fed forecasts the US economic growth this year will be 6.5% due to the reduction of unemployment. report the unemployment rate will drop to 4.5% from the current 6.2%.
Earlier, some economists predicted Fed policymakers would stick to their December 2020 estimate of not raising interest rates until 2023. Large-scale support measures Government and central banks to deal with the impact of the COVID-19 epidemic are of great support to the stock market. However, these measures also raise concerns about the price hike and the prospect of the Fed withdrawing its loosening monetary policy, including record low interest rates.
In recent weeks, US 10-year yields have risen to their highest level in a year. A Bank of America Merrill Lynch survey found that translating COVID-19 is no longer a major concern for traders today. Axi strategist Stephen Innes said that the most “hot” problem is the possibility of rising inflation, followed by the rise of bond yields. In that context, the Fed meeting plays a dominant role in the market’s sentiment.