When will the inflection point of the Fed's "first show" standstill monetary policy in 2021?

(Financial World) When will the inflection point of the Fed's 2021 "debut" monetary policy come?

　　China News Service, Beijing, January 28 (Reporter Xia Bin) The Fed officially concluded its first interest rate meeting in 2021, and announced its monetary policy statement in the early morning of the 28th Beijing time. Its interest rate level remained unchanged: the benchmark interest rate remained at 0% to 0.25 The% range remains unchanged, and the excess reserve ratio and discount rate are also maintained at 0.1% and 0.25% respectively.

　　In order to save the US economy that has been mired in the quagmire caused by the impact of the new crown pneumonia epidemic, the Fed launched a "big release" in 2020, and the ultra-loose monetary policy has exceeded historical levels.

Prior to this, the market has expressed concern about the US inflation level rising for several consecutive months and the performance is stronger than expected, that is, whether the Fed will change its loose monetary policy as a result.

　　The meeting released an accurate signal that the Fed still has a strong tolerance for inflationary pressures.

The meeting statement reiterated the forward-looking guidance on interest rates announced in September last year, stating that the Federal Open Market Committee’s goal is to achieve inflation moderately higher than 2% over a period of time so that the average inflation over a period of time can reach 2%, and long-term inflation expectations remain Well anchored at 2%.

　　Fed Chairman Powell stated that the Fed is firmly committed to achieving the dual goals and maintaining accommodative policies until the goals are achieved, and that the economy is still a long way from achieving employment and inflation goals.

"It is too early to talk about reducing debt purchases. The Fed's highly accommodative policy is very appropriate."

　　In an interview with a reporter from China News Agency, Wang Youxin, a researcher at the Bank of China Research Institute, said that in the context of the "sick operation" of the U.S. economy, maintaining loose monetary policy is conducive to stabilizing market expectations and promoting U.S. economic recovery.

Affected by repeated epidemics and lower-than-expected vaccination, the Fed's latest statement is slightly pessimistic about the outlook for the US economy. The statement of the meeting mentioned that the recovery of the US economy and employment has slowed in recent months, so monetary policy is necessary Continue to maintain easing.

　　"Furthermore, in the context of the Biden administration's new round of fiscal stimulus package, maintaining loose monetary policy is conducive to the implementation of fiscal policy, and avoids the excessive rise in the yield of national debt, which will affect the effect of the policy." Wang Youxin said bluntly for the global economy The loose monetary policy environment is conducive to stabilizing market expectations, improving international liquidity and the cross-border financing environment, maintaining financial market stability, and avoiding the rupture of debt leverage that is rising too quickly, which is beneficial to the economy as a whole.

　　So, when will the turning point of the Fed's monetary policy appear?

CICC research report believes that the Fed will remain patient with monetary policy.

There is no need to worry too much about reducing easing in the short term, but in the medium term, if the vaccine develops smoothly, the probability of discussing reducing easing in the second half of the year will increase.

　　Morgan Stanley predicts that the reduction in debt purchase plans may be announced at the Fed meeting in December this year.

The Fed may not worry about the recent rise in Treasury bond yields and inflation expectations, because unprecedented stimulus measures have injected a lot of liquidity into the market and improved the prospects for a strong economic recovery.

　　Wang Youxin pointed out that in the future, judging the timing of the Fed's monetary policy adjustment can focus on three major indicators, namely, the trend of the US epidemic, the trend of GDP and the rate of inflation.

"If the U.S. epidemic is effectively controlled, economic recovery accelerates, and inflation rapidly rises above 2%, the Fed will formally consider adjusting its policy orientation."

　　In his view, in order to avoid the risk of overshooting the market caused by the policy withdrawal, the Fed must, on the one hand, communicate with the market well in advance of policy communication and forward-looking guidance, so that the market can fully anticipate policy adjustments.

On the other hand, the pace, scale and timing of policy withdrawal should also be grasped, and the policy should not make a sharp turn. With reference to the experience of the normalization of monetary policy in 2015, the operation path can first reduce the scale of QE (quantitative easing), raise interest rates, and then shrink , The rate of interest rate hike and the scale of scale reduction should also be relatively controllable, and should not be rushed.

　　Wang Han, chief economist of Industrial Securities, said that for the Fed, in the process of exiting this round of quantitative easing in the future, it is expected that it will communicate with the market more adequately.

Taking into account the risk of a second economic downturn after the policy exit and the need for monetary policy to cooperate with expansionary fiscal policies, the tightening process may be repeated or even easing again, and the actual tightening space may be relatively limited.

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