The Federal Reserve begins to gradually reduce its bond purchases as the US economy has sufficiently recovered from the pandemic.
The US Central Bank (Fed) is taking an important step towards normalizing its monetary policy. On Wednesday, it decided to cut its bond purchases by $15 billion a month starting in November. With these purchases now amounting to $120 billion per month, the stimulus will in principle be stopped in June of next year.
The Fed said in a statement accompanying its decision that further significant progress has been made toward the dual goal of maximum employment and an average inflation rate of 2 percent. The unemployment rate has fallen to 4.8 percent since its peak of 14.8 percent in April of last year.
Inflation has risen above target. But the central bank still believes that high inflation is temporary, although it has become more cautious. It refers to “factors that are expected to be temporary”. After the last meeting, the Fed spoke of “temporary factors”.
The decision to cut stimulus for the economy was approved unanimously by 11 voting managers.
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