|
|
At this week’s U.S. Federal Reserve meeting, the Banksters will discuss when to begin tapering off the central bank’s $120-billion-a-month bond-buying program, and raise interest rates now that the nation’s economic recovery has allegedly blossomed more quickly than they had forecast at the beginning of this year.
The cheap money scheme, which began in March 2020 when the economy collapsed, currently sends $40 billion monthly into the mortgage market and $80 billion to buoy corporate and government bonds.
The group will debate when to begin pulling back its purchases and how fast to taper them off, Fed chair Jerome Powell said. (See “Fed Officials Send Mixed Signals on Policy Shift,” Trends Journal, 29 June 2021, and related story in this issue.)
Some in the group have urged that the Fed scale back its mortgage bond buying at the same rate it reins in other bond purchases.
That approach would take the Fed out of the mortgage business sooner, helping to cool off the overheated U.S. housing market, analysts have said.
The bank will not raise interest rates until it has finished scaling down its bond-buying, Fed members have confirmed previously, according to the WSJ.
Some of them have proposed scaling down the purchases in equal monthly installments at a rate that would end them in October 2022, leaving the bank ready to raise interest rates from their current near-zero levels.
The Fed’s benchmark measure of inflation rose 3.4 percent in May and 5.8 percent in June, year over year, well above the Fed’s 2-percent target rate.
However, the Fed holds tight to the view that current high inflation rates are temporary while the economy finds its footing. Last August, the bank shifted policy to allow inflation to run above 2 percent for a period to recover from price deflation during 2020’s crisis.
At June’s policy meeting, 13 of 18 Fed officials estimated they would raise rates by the end of 2023, not in 2024 as the Fed had expected earlier this year; seven said rates should increase by the end of next year.
TREND FORECAST: While we had forecast that inflation would force the Fed to raise interest rates sooner than the end of 2023, and the likelihood they will boost rates this year, this was before the Delta variant and COVID War 2.0 broke out.
As we have detailed, should Federal, state and city governments begin to impose more draconian Delta variant mandates, it will dramatically slow down economic growth. Thus, even if inflation remains above 3.5 percent through the end of this year, it is unlikely the Central Banksters will raise rates before 2023.