Fed: Accommodative monetary policy continues

The US Federal Reserve, Fed decided to keep its key rates unchanged and to continue its accommodative monetary policy today. According to the Fed Open Market Committee, the policy stays until the Central Bank has seen the inflation moderately above 2 percent for some time and has achieved maximum employment over the longer run. The federal funds rate is 0 to 1/4 percent.

-Fed is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals, it said.

-The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world. Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened, the Fed said.

-The path of the economy will depend significantly on the course of the virus, including progress on vaccinations. The ongoing public health crisis continues to weigh on the economy, and risks to the economic outlook remain.

-In addition, the Federal Reserve will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month until substantial further progress has been made toward the Committee’s maximum employment and price stability goals. These asset purchases help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses, the Central Bank said.

FED: Climate Change committee to identify the risks to financial markets

The US Federal Reserve has built a Financial Stability Climate Committee to identify and analyse the climate-related risks to financial markets stability.

-We are building the requisite institutional capacity and knowledge to deepen our understanding of these risks and vulnerabilities. The new FSCC is a Systemwide committee charged with developing and implementing a program to assess and address climate-related risks to financial stability. The broad goals of the FSCC are to promote the resilience of the financial system to climate-related financial risks, to ensure coordination with the Financial Stability Oversight Council (FSOC) and its member agencies, and to increase the Federal Reserve’s international engagement and influence on this issue, the Fed Governor Lael Brainard said (23.3.2021).

-To support the work of these committees and the broader work throughout the Federal Reserve System, we are investing in new research, data, and modeling tools. In light of the high uncertainty inherent in estimating climate-related shocks, scenario analysis may be a helpful tool to assess the effects on the financial system under a wide range of assumptions, the Central Bank said.

Powell: Fed is entering Climate Change risk management by engagement

The US Federal Reserve, Fed Chairman Jerome Powell said in today’s press conference that the Fed is entering the Climate Change risk management with careful planning and by engaging with different stakeholders, like public as well.

Mr Powell said that Climate Change is a topic which is related for example to credit and cybersecurity risks and thus the Central Bank is taking a careful planning around the issue. The Fed announced yesterday that it has joined the global network of central banks greening financial systems organization in order to share best practises and increase the engagement.

He did mention that the Central Bank is not thinking of changes in its credit allocations, like exclusions of different industry sectors. Powell reminded that the real concerns at the moment are the supervision and the financial markets stability.

FED: The US economy to grow 4,2 % next year

The US Federal Reserve, Fed has today published its US economic estimates for the coming years. The gross domestic product is estimated to increase next year by 4,2 %, while the September estimate was 4,0%. In 2022 the US GDP is estimated to grow by 3,2 % and in 2023 by 2,4%. The Central bank estimates that the federal funds rate will stay at their current level, at 0,1 %, until 2023.

Unemployment is expected to be 5,0% next year, while this year estimate is 6,7%. In 2022 the unemployment rate is estimated to be 4,2 % and in 2023 3,7%.

Core inflation is expected to increase to 1,8% next year, and be in 2022 1,9% and 2,0% in 2023.

All the estimates are median estimates.

FED: Supporting economy with extended assets purchases

The Federal Reserve, Fed said today it is committed to support the economy with maximum employment and price stability goals. The Central Bank also said it is extending its assets purchases. The key interest rates were kept unchanged.

-The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals, the bank said.

-The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world. Economic activity and employment have continued to recover but remain well below their levels at the beginning of the year. Weaker demand and earlier declines in oil prices have been holding down consumer price inflation. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses, the Fed stated.

-The path of the economy will depend significantly on the course of the virus. The ongoing public health crisis will continue to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.

-The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent, the Central Bank said.

-The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved. The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time, the bank said.

-In addition, the Federal Reserve will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month until substantial further progress has been made toward the Committee’s maximum employment and price stability goals. These asset purchases help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses, the Fed concluded.

FED to join the green network of Central Banks

The Fed, the US Federal Reserve, has joined the Network of Central Banks and Supervisors for Greening the Financial System (NGFS). According to Fed Chairman Jerome Powell, this will enable the further discussions with other central banks about the impact of climate change on the financial markets.

NGFS supports the exchange of ideas, research, and best practices on the development of environment and climate risk management for the financial sector. The organization has published for example research of how different central banks are integrating ESG (environmental, social and governance) issues to their own portfolios or pension funds. According to the publication, the different hybrid models of ESG portfolio strategies show that the portfolio management can be different due to the lack of standardised data management and taxonomy.

Fed is prepared for long period of low rates

The US Federal Reserve is prepared for long period of low rates. The new “powerful” statement of the Federal Open Market Committee today, stated that the Fed is seeking maximum employment and achieving inflation moderately above 2 % “for some time”.

-The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals, Fed said.

-The path of the economy will depend significantly on the course of the virus. The ongoing public health crisis will continue to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term, the Central Bank continued.

-The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved, Fed said

-The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.

-In addition, over the coming months the Federal Reserve will increase its holdings of Treasury securities and agency mortgage-backed securities at least at the current pace.

-The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world. Economic activity and employment have picked up in recent months but remain well below their levels at the beginning of the year. Weaker demand and significantly lower oil prices are holding down consumer price inflation. Overall financial conditions have improved in recent months, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses, Fed stated.

Mnuchin: Now is not the time to worry about the deficit or Fed´s balance sheet – CNBC

The US Treasury Secretary Steven Mnuchin said on Monday in CNBC that now is not the time to worry about the federal deficit or the Federal Reserve balance sheet to delay additional Covid-19 relief. His remarks are related to the negotiations of the additional corona stimulus package for households and small and medium-size entrepreneurs.

According to him these unprecedented times warrants extraordinary stimulus from Congress and the Fed. His comments are also critics towards the opinions that improving jobs and housing data would relax the need for additional stimulus to combat the pandemic and get the economy back to pre-pandemic levels.

Financial markets went up on Monday trading in New York and Dow Jones index closed up 1,18 % to 27.993,33 points. Nasdaq-index closed up 1,87% to 11.056,65 points and larger S&P 500 index closed up 1,27% to 3383,54 points.

News of possible corona vaccine at the end of this year, was noticed positively in the markets. Also many mergers news lifted the stocks. For example Oracle jumped 4 % after the news that it would be the winning bidder of TikTok´s US operations.

The Federal Reserve is having its policy meeting on Wednesday followed by the Bank of England and Bank of Japan on Thursday.

In Europe, the FT-SE 100 index was nearly flat, down 0,10% to 6026,25 points and Germany DAX-index closed down 0,07% to 13.193,66 points.

Fed is developing digital dollar for experiment – Marketwatch

The US Federal Reserve is developing digital dollar in order to make experiments related to the digital currency markets. According to Marketwatch, Fed Governor Lael Brainard said the aim is to enhance Fed´s understanding of digital currencies.

– Given the dollars important role as a global reserve currency, it is essential the Fed remains on the frontier of research and policy development of digital currencies, he said.

Digital currencies, bitcoins and digital money are the future trading transfers in different digital platforms. The value of the digital money is that the transactions are faster and more transparent.

Some analysts have also expressed their thoughts that in case of coronavirus pandemic, the goverments economic stimulus transfers would have been faster with digital currencies than with normal bank accounts enabling the recovery to be more effective

US stocks mixed – Tesla over 1000 dollars for the first time

The US stocks closed mixed on Wednesday. The Dow Jones closed down 1,04 % to 26989,99 points, the S&P 500 index closed down 0,53 % to 3190,14 points and Nasdaq-index closed up 0,67% to 10020,34 points.

The Federal Reserved said it has kept the rates unchanged at its meeting and that the low-levels of rates is expected to continue to 2022. The economy is expected to decline 6,5 % this year before it will rebound next year with 5 %. The Central Bank also confirmed that it is going to maintain the rate of the current bond buying programme.

The US is also planning 25 billion dollars aid to semiconductor industry. According to Bloomberg the plan is that this would create thousands new jobs and increase the US-made industry manufacturing in the US. This Chips Act will be discussed further.

The US electric car manufacturer Tesla share rose for the first time above 1000 dollars. Tesla shares closed at 1025 dollars, up 8,97 % on Wednesday.  The company has published its 2019 impact report on Monday.

In London, the FT-SE 100 index closed down 0,10% to 6329,13points. In Germany the DAX-index closed down 0,70 % to 12.530,16 points and in France the CAC40 index closed down 0,80 % to 5053,42 points.