Senior officials at the US Federal Reserve are preparing international financial markets for a reduction in monthly bond purchases.

To many financial market participants, an announcement seems likely as early as September in view of the strong economic growth and the increased inflation rate.

Gerald Braunberger

Editor.

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So far, this prospect has not caused any upheaval in the financial markets;

the yield on ten-year US government bonds remains very low by historical standards at 1.26 percent.

The serenity of the markets can be explained by the assumption that a reduction in bond purchases is unlikely to be followed by an increase in the key interest rate anytime soon.

An interest rate hike is not expected until the end of 2022 at the earliest.

"I think it's appropriate to start in the fall," said the President of the Federal Reserve Bank of Boston, Eric Rosengren, in an interview with the television network CNBC with a view to the bond purchases of currently 120 billion dollars a month.

“I certainly wouldn't wait any longer than December.

My preference would be to do it sooner rather than later. ”The Fed mostly buys government and mortgage bonds.

However, Rosengren rejected a rapid rate hike. To do this, you need a sustainable inflation rate of just over 2 percent and full employment. If the unemployment rate falls below 5.4 percent and wage increases keep the inflation rate well above 2 percent, one would have to think about an earlier point in time to raise interest rates. “I don't expect that,” said Rosengren. In the United States, the inflation rate was last at 5.4 percent, but most economists and monetary policy consider this rate to be bloated and unsustainable as a result of temporary influences.

Before Rosengren, several other Fed executives had expressed similar thoughts. This suggests a previously agreed strategy with which American monetary policy intends to prepare the financial markets in good time for a reduction in bond purchases without creating turbulence. When then Fed chairman Ben Bernanke unexpectedly announced a reduction in bond purchases in May 2013, bond prices collapsed in a fit of panic both in America and in many other countries. The Federal Reserve would like to avoid such a violent reaction from the financial markets today. The European Central Bank is also likely to discuss the future of its bond purchases in September. A rapid reduction is considered unlikely.