Central bank chief Jerome Powell wants to maintain the pace of bond purchases
The US Federal Reserve remains on the gas in terms of monetary policy despite the prospect of massive corona aid from the new government. It left the key rate in a range of zero to 0.25 percent on Wednesday. At the same time, the monetary authorities around Federal Reserve Chairman Jerome Powell want to maintain the pace of their monthly security purchases of 120 billion dollars (99 billion euros) to stabilize the economy.
A shutdown is therefore only an option when “substantial further progress” has been made on the way to full employment and price stability. According to the Fed, the corona crisis continues to weigh on the economy and the labor market and entails considerable risks for the economic outlook. The pace of economic recovery has already slowed in the past few months.
Powell recently made it clear that there is still a long way to go to full employment and at the same time put an end to the debate about an early meltdown in purchasing volume. That discussion had contributed to higher ten-year US bond yields. After the interest rate decision, the paper yielded little change at 1.011 percent.
Even if the discussion about shutting down purchases will not dry up anytime soon, the “Fed liquidity tap” will remain wide open for a long time, says economist Bastian Hepperle from Bankhaus Lampe.
