Wednesday, September 22, 2021 20:25
The Federal Reserve left key interest rates unchanged as expected. This was evident from the US central bank’s interest rate decision on Wednesday evening.
As expected, the federal funds rate remained at 0.00 to 0.25 percent. The discount rate was kept at 0.25 percent.
The decision to maintain the policy was made unanimously.
In addition, the Fed buys a total of $120 billion in Treasury and mortgage-related loans each month to keep financial markets stable and support the US economy.
Last December, the Policy Committee said it would continue the asset purchase program until significant progress was made toward maximizing employment and stabilizing prices.
The central bank now believes that the economy has already made progress toward those goals. If this continues, as expected, the central bank believes that a short-term purchase rate reduction is justified.
With that, the Fed made the promised advance announcement.
Interest Rate Expectations
Federal Reserve officials see the key rate, the federal funds rate, averaging 0.1 percent through the end of 2021. For 2022, the median forecast is revised upwards to 0.3 percent. In the June forecast, it was still 0.1 percent. The 2023 forecast was also revised upwards from June from an average forecast of 0.6 percent to 1.0 percent now. In the longer term, the federal funds rate is expected to average 2.5 percent, which is in line with the June forecast.
PCE inflation is expected to average 4.2 percent for 2021, compared to 3.4 percent in June. The 2022 estimate was revised upwards from 2.1 to 2.2%, while the 2023 estimate remained unchanged at 2.2%.
On the other hand, GDP growth in 2021 was revised down to 5.9 percent, from 7.0 percent previously. Growth of 3.8 percent is now expected in 2022, while 3.3 percent growth was still expected in June. In 2023, growth is now estimated at 2.5 percent, where it was previously assumed to be 2.4 percent.
Update: to add more information.
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