Den amerikanske centralbank er tilfreds med økonomien her og nu. Derfor vil renten foreløbig ligge fast.
Uddrag fra Nordea:
Fed Watch: Nothing to see here – January Minutes
The Fed is content: Growth is moderate, the labour market is strong, and risks to the outlook are more balanced. Thus, rates are likely to remain unchanged for “a time”, according to today’s minutes. Balance-sheet tapering and strategy review ahead!
This comment is one of those that could have been prepared well in advance, at least when it comes to the overall discussions about the economic outlook and monetary policy. There are still no signs of monetary policy easing ahead, although the FOMC’s bias remain firmly skewed towards more easing, and seemingly still not a lot of disagreement among FOMC members.
The interesting parts of today’s minutes are the more technical ones pertaining to the tapering of short-term liquidity measures and to the discussions about the potential changes in the upcoming review of the monetary policy strategy, but even there answers are few in today’s minutes.
Rate cuts?
Markets were pricing 30bp of rate cuts during this year at the time of the FOMC meeting, according to the minutes, but comprising central expectations of no policy changes and a clear bias towards cuts should downside risks to the economy materialise.
FOMC members saw the balance of risks as more favourable at the January meeting than last year, though still tilted to the downside. Trade war and hard-Brexit risks had diminished while geopolitical risks related the Middle East as well as the coronavirus had increased.
All in all, “participants viewed the current stance of policy as likely to remain appropriate for a time, provided that incoming information about the economy remained broadly consistent with this economic outlook.”
Tapering liquidity measures
Repo operations will remain in place at least through April but will be reduced gradually and phased out after April. A standing repo facility will probably be part of the discussions about the review of the monetary policy strategy.
T-bill purchases will most likely be tapered during Q2 from the current 60bn per month to a level that is in line with the organic growth of the balance sheet.
In sum, the Fed’s balance sheet will expand at a much more moderate pace in Q2. Tapering is about to begin.
Strategy review
Two elements of the review of the monetary policy strategy was discussed. The potential use of ranges around the inflation target and the interaction between monetary policy and financial stability.
Fed staff discussed three types of ranges around a symmetric inflation target, but it is not clear that any of the three will end up in the final decision. An uncertainty range would indicate the inherent volatility of inflation, ie a range within which inflation is close enough to its target given its volatility to be considered at target. An operational range could be part of a make-up strategy, where inflation for a period will be targeted above the normal target to make up for a period where the zero lower bound was binding, ie a period of deliberate overshooting. An indifference range within which the Fed wouldn’t care.
Financial stability seems to be gaining more and more attention and the trade-off between low rates and the potential building of financial stability risks was discussed, albeit without any firm conclusion. Some participants are becoming increasingly worried about corportate debt and valuations even if staff denotes financial stability risks as moderate.
