The Fed studies “unconventional” economic policy
In his speech on Friday, the president of the Federal Reserve of the United States, Jerome Powell admitted that, although the strategies implemented by the Fed have been effective, the agency is examining what other strategies could allow it to reach inflation of 2 %.
“We are analyzing whether our existing monetary policy tools will be adequate when the next recession comes. Finally, we are asking if our communication practices can be improved to better support the effectiveness of our policy, ”Powell said in his speech, which you can read in full here.
Powell also said that if interest rates are too low, “the Fed and other central banks have less space to reduce rates to support the economy during recessions.”
Gabriela Siller, Director of Financial Economic Analysis of Banco Base, comments because the current US interest rates provide a low room for maneuver, the Fed could be studying unconventional monetary policy strategies, in reference to liquidity injections through the “repos”, among other strategies.
Siller is struck by the fact that Powell says that the US economy “is fine”, he also speaks of “risks” and that, if these really increase and materialize, causing an impact on the economy – such as a recession, for example, The agency and could not maneuver with interest rates.
“Between 2006 or 2007, the United States had a 5% rate, then a 4.75% decrease; fifteen months later, at a rate of 0%. If they now have a rate of 1.75% -2.00%, the Fed has a low margin, ”says Siller.
And the Fed has a low room for maneuver at times in increased parental risks, so if the United States could enter a recession – something that has no energy, but also does not rule-out tools to boost the economy.
“They are seeing more risks, whether due to lack of liquidity, the effects of the trade war or the policies related to Trump’s political trial,” says Siller.
“They are going to have to apply unconventional monetary policy. Yes I think they can make another cut, to carry out the rate to a range between 1.50 -1.75%. But then, in 2020, or in 2012, what will they do? They will no longer be able to cut more, especially if one takes into account that Powell already said that negative rates are counterproductive. ”
US pressure on China will not ease Donald Trump has only two more months to lash out at China as Read more
ACS salivates with the billionaire plan of investment in infrastructure of the United States. ACS presented the results up to Read more
Joe Biden elected president of the United States. Trump's victory four years ago took everyone by surprise. Now it was Read more
Once the United Kingdom has left the European Union, talks with the USA for the free trade agreement are restarted. Read more
US Quickly Seeks COVID-19 Vaccine. "Phase 1 of the clinical trial to evaluate an investigational vaccine designed for coronavirus disease Read more
The Federal Reserve acts fast and strong. After days of insistent pressure from the president, the US Federal Reserve (Fed) Read more
The real reason why the Mobile World Congress has been canceled. A few days ago the Mobile World Congress (MWC) Read more
Official figures remain slightly below expectations regarding job creation and wage inflation, but the unemployment rate remains at a minimum Read more
The Fed's rescue plan aimed at guaranteeing the liquidity of the municipalities will also continue until December. Investors remain wary Read more
Slow and risky recovery. "The recovery in the economy is extraordinarily uncertain and will largely depend on our success in Read more