Home Economy Will a dramatic US recovery change the Federal Reserve's policy stance?

Will a dramatic US recovery change the Federal Reserve’s policy stance?


Will a dramatic US recovery change the Federal Reserve’s policy stance?

The Federal Reserve convened a two-day policy meeting on Tuesday amid speed up quickly economic recovery.

In the weeks since the last US central bank meeting in mid-March, initial unemployment claims in the world’s largest economy fell to their lowest level since the start of the world. Translation and data show that retail sales in March rose the most in 10 months. Meanwhile, more than half of the adult US population is now receiving the first coronavirus vaccine, paving the way for the easing of social curbs across the country.

While Fed Chairman Jay Powell admitted this month that the US economy is at “inflection point“He did not stray from his stance that monetary policy will remain extremely relevant until the central bank’s goals for a more comprehensive recovery are realized.

Powell also reiterated the Fed’s willingness to see inflation well above its 2% target to make up for the prolonged period of its breakout.

Investors will watch closely at Powell’s press conference on Wednesday for any signs of the Fed’s thoughts on a potential increase in inflationary pressure that could force them to lower their asset buying program monthly yield is worth $ 120 billion while the policy interest rate remains at the level close to zero.

Jim O’Sullivan, chief US macro strategist at TD Securities, said the Fed could begin to scale down its bond buying program as early as March 2022. However, he does not expect the Fed will raise policy rates until September 2024. “The criterion is much stricter than the descending criterion,” he said. Colby Smith

Are there brighter times for the European economy?

European Central Bank President Christine Lagarde last week motioned that more data is needed to assess whether the eurozone economy is on track to recover, despite a promising rise in Covid-19 vaccination.

But preliminary growth figures, released on Friday by Eurostat, is expected to show that the eurozone’s gross domestic product fell 0.8% in the first quarter from the previous quarter, according to a Reuters survey. . Declining output will push the bloc into a second technical recession – defined as two consecutive quarters of declining GDP – since the start of the pandemic.

Bert Colijn, an economist at ING, describes this as a “recession that seems purely the result of measures to limit output in certain sectors”, including hotels and Personal services, such as hair salons, and point out brighter times ahead. “The fate of the eurozone economy is about to change.”

Analysts at Nomura agreed, the economic recovery will begin by the end of the second quarter.

Data released over the weekend bolstered such optimism, with activity in the service sector of the eurozone. return to growth this month for the first time since last summer although there continue to be restrictions. The IHS Markit euro zone quick-purchase manager index for services rose to 50.3 in April, from 49.6 in March.

However, the euro zone continues to perform poorly compared to the US and UK because Immunization deployment was slowDelayed reopening and weaker financial support. Valentina Romei

How is China’s vast factory area developing?

China’s Manufacturing Purchasing Managers Index for April, which launches on Friday, will be closely watched for signs of further expansion as the country’s economy continues to recover.

According to official figures from the National Bureau of Statistics, operations of factories in the country beat expectations to 51.9 by March. Read over 50 signals of expansion.

That month’s data shows an increase in activity after factories partially shut down in early 2021 because of the Chinese New Year, though many still works because of travel restrictions and high overseas demand for Chinese exports.

April production data will shed light on the burgeoning nature of Chinese industry and the export-based recovery, which is expected to shift to household spending is higher.

A Bloomberg survey of economists forecasts April data will drop slightly to 51.6.

Data released earlier this month show gross domestic product leaps and bounds by a record compared with the same period last year in the first quarter, although the increase was justified by a decrease in the year earlier due to the pandemic.

Quarterly GDP growth of only 0.6% was much lower than expected, questioning the rate of recovery.

Non-manufacturing PMI data, also released on Friday and soared to 56.3 in March, will show the role of the Chinese services sector in the recovery. A Bloomberg survey also predicted a small drop in April, to 56.

Christina Zhu, an economist at Moody’s Analytics, said in early April that “service recalls are largely due to successful viral containment and accelerated vaccine delivery”. Thomas Hale

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