The American Central Bank (Fed) could distill a few clues on Wednesday as to the pace at which it plans to reduce its support to the economy, the recovery now being launched and even accompanied by inflation which is causing some concern.
Officials at the Washington monetary institution are not expected to announce any changes immediately, in the statement to be released at 2:00 p.m. (6:00 p.m. GMT) on Wednesday after the two-day meeting.
The key rates should remain for a while longer in the range of 0 to 0.25% in which they were lowered in March 2020, to stimulate credit and therefore consumption.
As for asset purchases, which have allowed the markets to continue to function despite the crisis, they should be maintained at their current level: 120 billion dollars per month, including 80 billion treasury bills and 40 billion MBS (products mortgage-backed financials).
The Monetary Committee, on the other hand, is eagerly awaited on what they intend to do in the future.
Its 11 members could, for the first time, indicate when and how they plan to reduce the Fed's support to the economy.
Starting with asset purchases, which are supposed to move first.
- "Still far from the objectives" -
Fed Chairman Jerome Powell is expected to make "the distinction between the planning of the reduction and the reduction itself" at his press conference on Wednesday, observes Krishna Guha, economist for Evercore, in a note.
In particular, he should reiterate "that the economy is still far from the Fed's objectives and that it will probably take some time to achieve further substantial progress, the criterion for this reduction," he adds.
It is particularly on the employment front that progress remains to be made.
Before changing their policy, Fed officials want the country back to full employment.
Because if the unemployment rate fell to 5.8%, it remains very far from the 3.5% before the crisis.
In addition, 7.6 million jobs are still missing compared to this period.
However, more committee members than in March, when the latest forecasts were released, will consider starting to hike rates in 2023, but the majority should still prefer not to do so until 2024, according to Diane Swonk, economist. for Grant Thornton.
"Inflation and economic growth have been stronger than expected," she said.
- Economic forecasts -
The Federal Reserve will also update its economic forecasts.
In March, it expected gross domestic product growth of 6.5% for 2021 and 3.3% in 2022.
It was also more optimistic about the unemployment rate than in its previous forecasts published in December: 4.5% this year, 3.9% in 2022, 3.5% in 2023, i.e. the pre-crisis level which was then at its lowest for 50 years.
And for inflation, it forecast 2.4% in 2021, before stabilizing around 2%, in line with its long-term objective.
The issue of reducing asset purchases was first discussed at the last meeting at the end of April, with some officials considering that it should start discussing soon.
Since then, the world's largest economy has continued to recover.
And above all, inflation, as expected, accelerated: the rise in prices in May was the strongest for 13 years, + 5% over one year, according to the CPI index of the US Bureau of Statistics.
A spectacular jump, certainly, but due in large part to the effect of comparison with prices which had fallen in the spring of 2020. This has led some economists to anticipate a slowdown in inflation from June, since prices had returned to the increase a year ago.
The Fed uses another measure of inflation, the Commerce Department's PCE index, which in April experienced its strongest acceleration since 2007, + 3.6% year-on-year.
© 2021 AFP