{"id":116565,"date":"2021-06-16T14:24:34","date_gmt":"2021-06-16T14:24:34","guid":{"rendered":"https:\/\/fin2me.com\/?p=116565"},"modified":"2021-06-16T14:24:34","modified_gmt":"2021-06-16T14:24:34","slug":"fed-expected-to-flag-start-of-monetary-policy-shift-debate","status":"publish","type":"post","link":"https:\/\/fin2me.com\/markets\/fed-expected-to-flag-start-of-monetary-policy-shift-debate\/","title":{"rendered":"Fed expected to flag start of monetary policy shift debate"},"content":{"rendered":"

WASHINGTON (Reuters) – Federal Reserve officials on Wednesday are expected to at least signal the pending start of talks about when and how to exit from the crisis-era policies the U.S. central bank put in place at the onset of the coronavirus pandemic last year.<\/p>

FILE PHOTO: The Federal Reserve building is pictured in Washington, DC, U.S., August 22, 2018. REUTERS\/Chris Wattie\/File Photo<\/figcaption>

With U.S. inflation rising faster than expected and the economy growing at its quickest pace in decades, some policymakers are questioning whether the Fed should keep its benchmark short-term interest rate near zero and leave unchanged a massive bond-buying program used to stem the economic fallout from the pandemic.<\/p>\n

Graphic: Fed vs. private 2021 GDP outlook:<\/p>\n

Balanced against the improving economic terrain: The United States is still 7.5 million jobs short of where it was in early 2020, and the reopening of schools, concert venues and a host of other public areas remains a work in progress.<\/p>\n

Daily U.S. coronavirus infections and deaths have plummeted. But only about half of those over the age of 12 have been fully vaccinated, short of what epidemiologists feel is needed to squelch the virus for good and eliminate the risk of future localized outbreaks.<\/p>\n

Any actual change in monetary policy is, as a result, likely months down the road as the Fed balances risks that continue to pull in two directions.<\/p>\n

U.S. import prices surged 11.3% in May on a year-on-year basis, the Labor Department reported on Wednesday, with a jump in the cost of non-fuel industrial supplies and materials possibly setting the stage for continued increases in prices for finished goods.<\/p>\n

Yet U.S. housing starts rebounded less than expected last month and permits for future homebuilding fell, a sign of how recent outsized price increases for lumber and other supplies could sap demand and lead to slower growth.<\/p>\n

The jobs recovery has been steady but slower than expected, though hiring data from time management company UKG showed a strong jump in shift work from mid-May to mid-June that could point to a summer jump in employment.<\/p>\n

U.S. central bankers will take stock of all that in their latest policy statement, due to be released with fresh economic projections at 2 p.m. EDT (1800 GMT). Fed Chair Jerome Powell is scheduled to hold a news conference to elaborate on the two-day meeting.<\/p>\n

Given the depth of the coronavirus downturn, the Fed is expected to continue emphasizing that it will support the economy until more workers are back on the job.<\/p>\n

Yet enough has changed in recent months – and may start to change at an even faster clip – that analysts expect the Fed to at least acknowledge that an internal debate over an exit strategy has begun. That discussion will eventually lead to a plan to first reduce the monthly $120 billion in bond purchases to zero and then to start raising interest rates.<\/p>\n

\u201cThis is about getting the ball rolling,\u201d in a process that may take months to complete, and in a way that avoids any rapid shift in sentiment among investors or consumers that could damage the recovery in the meantime, wrote Tim Duy, chief U.S. economist for SGH Macro Advisors and a University of Oregon professor focused on Fed policy.<\/p>\n

Graphic: Substantial further progress for the Fed? :<\/p>\n

LIFTOFF<\/h2>\n

The new interest rate and economic projections will show just how much policymakers\u2019 views have changed since March, when Fed officials at the median still projected the first interest rate increase would be delayed until at least 2024.<\/p>\n

U.S. job growth has been weaker than expected in the intervening weeks, but inflation has run hotter – a worst-of-both-worlds outcome that has forced the Fed to bank on recent price hikes proving \u201ctransitory,\u201d and hiring to accelerate as the nation\u2019s economic reopening continues.<\/p>\n

The Fed has laid out an explicit test for any rate hike – including the need for inflation to not just reach but exceed the central bank\u2019s 2% target \u201cfor some time\u201d in order to make up for years of too-low inflation.<\/p>\n

The economy may only be at the start of that journey, even with the recent jump in the Fed\u2019s preferred inflation measure to 3.6%. While that was the highest in 13 years, it was only one monthly reading and driven by factors officials feel will fade.<\/p>\n

Still, the timing for the initial \u201cliftoff\u201d of rates could shift into 2023 if only two or three officials feel the improved outlook, or a too-fast-return of inflation, would warrant faster action.<\/p>\n

Deutsche Bank\u2019s chief U.S. economist, Matthew Luzzetti, wrote last week that he felt it a \u201cclose call\u201d whether the Fed\u2019s updated interest rate projections would advance an initial rate hike into next year. Ultimately, he said, Fed officials will see keeping rates lower for longer as the better path.<\/p>\n

\u201cWith the labor market lagging, no strong evidence that the Fed\u2019s transitory inflation story is incorrect, and market pricing moving closer to the Fed\u2019s views on inflation and the policy rate, the (Federal Open Market) Committee should not yet feel compelled to send a hawkish signal through their rates guidance,\u201d Luzzetti said.<\/p>\n

Source: Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

WASHINGTON (Reuters) – Federal Reserve officials on Wednesday are expected to at least signal the pending start of talks about when and how to exit […]<\/p>\n","protected":false},"author":3,"featured_media":116564,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"yoast_head":"\nFed expected to flag start of monetary policy shift debate - Fin2me<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fin2me.com\/markets\/fed-expected-to-flag-start-of-monetary-policy-shift-debate\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Fed expected to flag start of monetary policy shift debate - Fin2me\" \/>\n<meta property=\"og:description\" content=\"WASHINGTON (Reuters) – Federal Reserve officials on Wednesday are expected to at least signal the pending start of talks about when and how to exit [...]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/fin2me.com\/markets\/fed-expected-to-flag-start-of-monetary-policy-shift-debate\/\" \/>\n<meta property=\"og:site_name\" content=\"Fin2me\" \/>\n<meta property=\"article:published_time\" content=\"2021-06-16T14:24:34+00:00\" \/>\n<meta name=\"author\" content=\"Mark\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:image\" content=\"https:\/\/fin2me.com\/wp-content\/uploads\/2021\/06\/Fed-expected-to-flag-start-of-monetary-policy-shift-debate.jpg\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Mark\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/fin2me.com\/markets\/fed-expected-to-flag-start-of-monetary-policy-shift-debate\/\",\"url\":\"https:\/\/fin2me.com\/markets\/fed-expected-to-flag-start-of-monetary-policy-shift-debate\/\",\"name\":\"Fed expected to flag start of monetary policy shift debate - 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