After yesterday’s meeting of the Fed, he did not have to come up with a new monetary policy, and yet the outcome of his meeting had a significant impact on the markets. Behind it is the publication of a new forecast in which the Fed forecasted zero interest rates until the end of 2022. The very dovish interest rate of the Fed is to act here as forward-looking promises that official rates will remain very low for a very long time, which would have most of the yield curve. dock near zero. This policy should not only help the economy recover from the corona crisis, but also provide “cheap” financing for fast-growing government debt.
The most interesting point in Fed Chairman Powell’s statement was that the central bank was ready to use other expansionary instruments, although he did not allow himself to be pressured in the press to state what would have to happen for the FOMC to take an even more aggressive approach. For example, to even more massive purchases of assets to their balance sheet or to directly control the yield curve, or to cap market interest rates.
So let’s prepare for long-term ultra-low interest rates, which will be supported by massive monetary expansion for at least the next few quarters through a rapid inflation of the Fed’s balance sheet, which is loading risky assets such as stocks but on the other hand weakening the dollar.
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