Fed: On Track To Slow Support To The Economy Later This Year | national


The central bank’s pullback in bond purchases and its possible rate hikes, whenever they happen, will mean some borrowers will have to pay more for mortgages, credit cards and business loans.

Equity and bond traders took the Fed’s message eagerly on Wednesday. The Dow Jones Industrial Average, which had risen more than 400 points before the Fed issued a policy statement, closed 338 points higher, or a full 1%. The yield on the 10-year Treasury bill was virtually unchanged at around 1.31%.

The economy has recovered faster than many economists expected, although growth has slowed recently as COVID-19 cases have increased and labor and supply shortages have increased. hampered manufacturing, construction and some other sectors. The US economy has returned to its pre-pandemic size and the unemployment rate has fallen from 14.8% shortly after the pandemic to 5.2%.

At the same time, inflation surged as resurgence in consumer spending and disruption in supply chains combined to create shortages in semiconductors, cars, furniture and electronics. Consumer prices, according to the Fed’s preferred measure, rose 3.6% in July from a year ago – the biggest such increase since 1991.

In their new quarterly projections, Fed officials plan to raise their short-term policy rate once in 2022, three times in 2023 – one more than they expected in June – and three times in 2024 This benchmark rate, which influences many lending consumers and businesses, has been close to zero since March 2020, when the pandemic erupted.


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