The Fed is expected to continue its easing policy until the end of 2021

The US Federal Reserve (Fed) will continue to maintain loose monetary policies at least for the remaining months of 2021, regardless of challenges in controlling inflation.

Fed headquarters in Washington. Photo: AFP

Here are the results of the latest CNBC survey. The first major change the Fed will make to monetary policy is a $120 billion cut in its monthly asset purchases, which is expected to be announced in October 2021, experts polled say. and the start of the cuts will begin in January 2022.

Survey respondents expect the first rate hike to happen in November 2022, a month earlier than the previous survey forecast.

Of the 35 experts polled, 86% think the Fed’s current level of asset purchases is unnecessary to prop up the market. This is a significant increase from 68% in the April survey. Up to 89% of respondents rated Fed asset purchases as unnecessary to stimulate the economy, while the rate recorded in April is 65%. When asked about inflation, 63% of respondents think the risks to the US economy are big enough for the Fed to cut back on buying now.

John Ryding, chief economic adviser at independent investment bank Brean Capital, commented: “Fundamental economics argues strongly that the US is having trouble with the responsiveness of the supply curves for both goods and labor. movement, not a lack of demand”. “Monetary policy should pivot to address the risk of rising inflation and should not operate in an outdated framework,” said John Ryding.

“Inflation will rise faster and last longer than the Fed has expected, but it won’t significantly change the Fed’s schedule,” said Mark Vitner, senior economist at Wells Fargo Corporate and Investment Bank. them in quantitative easing (QE) or raising interest rates”.

In fact, inflation has topped the list of potential threats to the US economy, outpacing the Covid-19 threat by a solid margin. 60% of people surveyed this time by CNBC think that inflation is only temporary, while 29% think it is a long-term problem.

The average forecast of the US CPI for the whole year 2021 is 3.88%, up sharply from the 2.76% predicted in the previous survey. Respondents believe that the US CPI will peak at 5.3% in November 2021.

“The Fed is making a hedging bet. It has more tools to deal with excess inflation than cutting jobs because we’ve seen long-term job shortages.” Ms. Diane Swonk, chief economist at business consulting firm Grant Thornton commented.

Investors expect the Fed to keep its dovish policy stance after its two-day meeting from June 15. Some Fed officials think the agency should start talking about cutting bond purchases, while most investors believe the majority of US policymakers still want to see more before they can. Adjust policy.