U.S. Federal Reserve Board (Fed) Vice Chairman Clarida (Richard Clarida) said Friday (9), the end of this year’s inflation data will be the key to study and judge the rising trend of inflation is a temporary or persistent phenomenon, if there is no reversal of the trend into 2022, will have to take the inflation situation into account in decision-making.
Clarida said the Fed assumes that inflation will heat up this year and fall back to 2% at the end of the year, and if the situation does not develop as expected, the Fed will have the tools to respond.
He said strong demand, potential supply chain bottlenecks, are likely to let inflation rebound from last year’s weak trend, and lead to price increases in the next few months beyond the Fed’s 2% target, “our basic assumption that rising inflation is temporary, and later this year will fall back to 2%… If by next year, price increases are not cut, we will have to take that into account.”
According to the Fed’s latest forecast, inflation is likely to reach 2.4% this year, well above target, but will fall back to 2% next year and rise to 2.1% in 2023. According to the dot plot, the benchmark interest rate could rise at some point after 2023.
Clarinda said the epidemic itself brought a fairly rare shock, and even though prices rose, there are still big holes in the job market that need to be fixed.
Clarify market rumors about bond purchase adjustment
New York Federal Reserve Bank officials recently a speech triggered market speculation that Fed may through the purchase of bonds to suppress the speculation of the U.S. bond yield, 20-year bond yield fell steeply on Thursday. In this regard, Clarida said that the statement is simply describing how Fed policy is implemented, not to announce a change in policy.
Lorie Logan, an official who manages the $7.7 trillion System Open Market Account (System Open Market Account) for securities and cash held by the New York Associated Bank, said Thursday that the U.S. Treasury resumed issuing 20-year bonds last year, leading to an increase in 20-year bonds in circulation, adding that because of anti-inflationary bond (TIPS) issuance has been increasing at a slower pace than interest-paying bonds, and net bond issuance is expected to remain high in the near term, the structure of the bond site is expected to continue to evolve.
We plan to make minor technical adjustments to the types purchased and to update the allocation to the types purchased more frequently to keep the supply of nominal bonds and anti-inflation bonds in circulation roughly proportional,” she said. We plan to make these announcements in the next few months of normal scheduled purchases.”
Clarida explained that the Fed’s monthly bond purchase program is intended to reflect the different types of securities issued by the U.S. Treasury, and when changes occur, the Fed must also make adjustments, “but this is not a reversal that is intended to affect a particular interest rate, and I would not define this as a ‘reversal operation’ .”
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