The Federal Reserve Board (Fed) decided on the 27th to maintain the most easing monetary policy stance in history. It is a judgment that we must first wait for the economy to recover.
Fed Chairman Jerome Powell said it is not yet the time to set the point of’tapering’ to gradually reduce the size of the Fed’s asset purchases. Currently, the Fed is releasing money on the market by buying $120 billion in assets each month.
“It’s not yet time to talk about tapering. Revision of the Fed’s asset buying policy requires significant and additional progress towards our goals. It is too early to mention a specific date. There must be substantial progress.”
Powell also said that even if there is some inflation this year, it is okay if the number of jobs that will disappear forever decrease by that much.
“I am much more concerned about the situation where the economy is only on the verge of a full recovery, and people are unable to return to their jobs on time, losing their lifelong careers and lives forever. I think this is a bigger problem than what could be caused by high inflation. To be honest, we think it’s okay if inflation gets higher.”
Good news for bitcoin investors.
At this meeting, the Fed’s Federal Open Market Committee (FOMC) agreed to maintain an asset purchase program that maintains the federal funds rate between 0 and 0.25% and purchases $80 billion worth of U.S. Treasury bonds and $40 billion worth of mortgage securities every month. decided.
The FOMC said, “The pace of economic activity and employment recovery has slowed in recent months,” but said it will maintain easing monetary policy until inflation remains steady at 2% on average.
Market reaction
The market responded to the Fed’s decision. On the same day, the S&P 500 index fell by more than 2%, generally continuing the decline. After Powell’s remarks, the price of Bitcoin has only risen 1%.
The decision is in line with economists’ recent outlook that the Fed will continue to supply abundant liquidity until sectors hit by the Corona 19 pandemic can return to their former state.
Chairman Powell dismissed what the Fed Vice Chairman Richard Clarida had previously mentioned. Vice-Chairman Clarida said that inflation must remain at the 2% level for at least a year to raise interest rates.
“Since inflation has been steadily below 2%, we hope that it will remain stable above 2% for a while. There is no specific formula, and it will never be. I want to leave room to judge and respond according to the situation at that time.”
During the press conference of Chairman Powell, Bitcoin was mentioned once. CNBC reporter Steve Lizman referred to bitcoin by asking if lower interest rates would cause asset prices to rise and create a bubble that could hit the economy in the future. “Vulnerabilities that can harm financial stability are generally good.”Replied.
· Translated by NewsPeppermint.
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