Pending Danger: Federal Reserve Warns, Economy Is Unstable

Written By BlabberBuzz | Friday, 24 September 2021 23:45

Completely dismissing rising inflation as transitory, the Federal Reserve has indicated interest rates could rise in 2022 a year earlier than predicted.

Federal Open Market Committee officials issued a statement Wednesday indicating that the Fed may begin to raise its interest rate, which currently sits close to zero, sometime next year, earlier than it envisioned three months ago.

This comes as a clear sign that the Fed is concerned increases in inflation may persist, with interest rates used to curtail the issue by raising the cost of borrowing.

Despite that indication, the Committee still sought to hush fears of inflation, which is forecast to hit 4.2 per cent in 2021 - double the desired level.

'Inflation is elevated, largely reflecting transitory factors,' the Federal Open Market Committee stated.

NO SCIENCE TO CALIFORNIA'S CRACKDOWN ON GAS

NO SCIENCE TO CALIFORNIA'S CRACKDOWN ON GAS

The Fed also reported it will likely begin slowing the pace of its $120 billion in monthly bond purchases later this year if the economy keeps improving.

The purchases of Treasury bonds and mortgage-backed securities are intended to encourage borrowing and spending, but have also flooded the market with money, concerning inflation hawks.

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At a news conference, Chair Jerome Powell said the Fed could announce a pullback in bond buying as soon as its next meeting in November.

Taken together, the Fed´s pullback in bond purchases and its eventual rate hikes, whenever they occur, will mean that some borrowers will have to pay more for mortgages, credit cards and business loans.

Nine of 18 U.S. central bank policymakers projecting borrowing costs will have to rise in 2022, an accelerated timeline from the last policy meeting.

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WATCH: CHICAGO'S EVIL MAYOR VILIFIES COPS ON CAMERA

In projections included in the release, policymakers forecasted inflation at 4.2 percent for the year, more than double the Fed's target rate.

Taken together, the Fed's plans reflect its belief that the economy has recovered sufficiently from the pandemic recession for it to soon begin dialing back the extraordinary support it provided after the coronavirus paralyzed the economy 18 months ago.

FACT: SUPPLY CHAIN CRISIS HURTING MOST AMERICANS

FACT: SUPPLY CHAIN CRISIS HURTING MOST AMERICANS

Stock and bond traders seemed pleased by the Fed's policy statement, at least initially.

Soon after it was issued, the Dow Jones Industrial Average's gain for the day surged from 1 percent to 1.5 percent. And the yield on the 10-year Treasury note dipped from 1.32 percent to 1.30 percent.

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As the economy has steadily strengthened, inflation has also accelerated to a three-decade high, heightening the pressure on the Fed to pull back.

Inflation has also turned into a political weakness for President Joe Biden, but the White House has repeatedly insisted that rising prices are a temporary symptom of a roaring economic recovery. Inflation can also be triggered by overheated demand, with many Americans keen to shop and travel after months stuck at home while COVID raged.

Biden will soon decide on whether to reappoint Powell as Fed chair, a role that is ostensibly politically neutral.

However, the left-wing flank of his party, including the 'Squad' of progressive House Democrats are calling for Powell to be replaced, insisting he hasn't done enough to address climate change and racial inequality.

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