Future strategy will primarily depend on the further course of the pandemic
The US Federal Reserve will probably confirm its loose monetary policy this Wednesday. The Fed can wait for the first meeting since the new US president took office, as the government wants to react to the crisis with an additional stimulus package. Future monetary policy is likely to depend primarily on the further course of the corona pandemic.
On January 20th, Joe Biden was named President of the USA. It should be important for the Fed that a 1.9 trillion dollar (1.6 trillion euros) fiscal program is being worked on. The new finance minister Janet Yellen stands for a business cycle-friendly financial policy. This should relieve the Fed in combating the severe consequences of the corona crisis.
The number of infections in the USA has been high until recently. This has a negative impact on the economic recovery. “At the same time, the medium-term prospects are relatively good since the vaccinations are progressing at a relatively high pace compared to many other countries,” writes Commerzbank economist Bernd Weidensteiner. It is therefore important to bridge the coming months. According to Weidensteiner, the instruments of financial policy are more suitable here than those of the central bank.
The Fed should therefore confirm its key interest rate in the range of 0 to 0.25 percent. The low interest rates are to be maintained until the employment target is achieved. In terms of inflation, the Federal Reserve wants to allow the target mark to be exceeded by two percent for a certain period of time.
