Fed signaled that purchases could soon be scaled back

The US Federal Reserve (Fed) is sticking to its very loose monetary policy. The key interest rate remains in the low range of 0.0 to 0.25 percent, as the central bank announced. The Fed will also continue to buy $ 120 billion in securities per month. At the same time, the central bank signaled that purchases could soon be scaled back. The purchase of securities decided last year because of the corona crisis is intended to improve the liquidity of the financial markets and facilitate the provision of loans for households and companies. At the end of July, with a view to the bond program, the Fed had already announced that the US economy had made progress on the goals of full employment and inflation. This has now been confirmed. And the Fed announced that a slowdown in the repurchase rate could "soon" be justified if the trend continues as expected. "We have not yet decided on the pace," said Fed Chairman Jerome Powell. The decision could be made at the next meeting in November, he said. Overall, the central bank considers a gradual meltdown of purchases to be appropriate, which could be concluded in the middle of next year. He does not assume that there will be an interest rate hike before the expiry of the securities purchases, Powell continued. The Fed currently buys around $ 80 billion in government bonds and $ 40 billion worth of mortgage-backed securities a month. The current interest rate level, meanwhile, is appropriate until there is full employment in the labor market and the inflation target of around two percent has been reached, the Fed emphasized after a meeting of the responsible money market committee. The European Central Bank (ECB) recently announced a slight curtailment of its bond purchase program. The Fed has lowered its forecast for economic growth this year. In June, the central bank had assumed an increase of 7 percent, now it expects growth of 5.9 percent. The rapid recovery of the US economy from the Corona crisis had recently slowed down somewhat due to the rapid spread of the delta variant. For 2022, the central bank now expects growth of 3.8 percent after the June forecast of 3.3 percent. In terms of inflation, the Fed now expects 4.2 percent for this year instead of the June forecast of 3.4 percent. Powell was convinced that it was a temporary effect - but at the same time admitted that inflation could remain high for the time being. For the coming year, the Fed now expects 2.2 percent after a forecast of 2.1 percent in June.