He chairman of the Federal Reserve, Jerome Powellexplains the decision of keep the policy rate, the federal funds rate, unchanged in the range of 5.25%-5.5% and answers questions at the post-meeting press conference.
Featured Statements
“I like to look at the 3- and 6-month series in the payroll report, given the differences in the establishment and household surveys.”
“The overall picture is one of a strong and gradually cooling labor market.”
“It has given us an ambiguous result, but the fact is that the labor market is strong.”
“It’s no longer the overheated labor market of a few years ago.”
“What changed the forecasts for the path of rates was inflation.”
“We had a pause in inflation progress in the first quarter, the bottom line was that it will take longer to get to the rate cuts.”
“We have to let the data light the way.”
“Today was a better inflation report than almost anyone expected.”
“The neutral long-term interest rate is theoretical.”
“People are coming to the conclusion that interest rates are less likely to return to pre-pandemic levels.”
“We are doing politics with the economy we have and the distortions we have.”
“The policy is restrictive.”
“The question of whether the policy is restrictive enough will be answered over time.”
“The evidence is quite clear that the policy is currently restrictive and is having the impact we expected.”
“We are prepared to adjust policy as appropriate.”
The Fed
The monetary policy of the United States is directed by the Federal Reserve (Fed). The Fed has two mandates: achieving price stability and promoting full employment. Your main tool to achieve these objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the Federal Reserve’s 2% target, it raises interest rates, raising borrowing costs throughout the economy. This translates into a strengthening of the US Dollar (USD), as it makes the United States a more attractive place for international investors to place their money. When inflation falls below 2% or the unemployment rate is too high, the Federal Reserve can lower interest rates to encourage borrowing, which weighs on the greenback.
The Federal Reserve (Fed) holds eight meetings a year, in which the Federal Open Market Committee (FOMC) evaluates the economic situation and makes monetary policy decisions. The FOMC is made up of twelve Federal Reserve officials: the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the eleven presidents of the regional Reserve banks, who serve for one year on a rotating basis.
In extreme situations, the Federal Reserve can resort to a policy called Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit into a clogged financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis of 2008. It involves the Fed printing more dollars and using them to buy high-quality bonds from financial institutions. QE usually weakens the US dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the capital of the maturing bonds it has in its portfolio to buy new bonds. It is usually positive for the value of the US Dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
