The key event of the week has been left behind and the US markets have something to think about after its results became known. The Federal Reserve system left the key rate unchanged in the range of 0-0.25%. The Monetary Committee said that rates will remain at current values until the labor market is fully restored, and inflation is not stable at the target level of 2%. The Federal Reserve noted that economic and business activity continues to improve due to vaccination of the population. Improvement is observed in all sectors of the economy, but not all of them are recovering evenly. There are sectors most affected by the pandemic (such as truism or transportation) that are recovering more slowly than others and they are associated with the risks of a new slowdown, since recently in America there has been an increase in the number of cases of the delta variant of the coronavirus. The US regulator also said that it is going to maintain the current pace of buying bonds in the amount of $80 billion per month and mortgage-backed securities in the amount of $40 billion per month. Thus, by and large, the Fed meeting can be considered completely passing. No changes were made to the monetary policy. This is bad for the US currency, the dollar has fallen in price against all its competitors. No reaction of the stock market was noticed.
It should be understood that one of the main reasons for the growth of the US stock market is precisely the fact that the Fed is pouring at least $120 billion into the economy every month. Thus, most of this money settles just in the markets associated with making a profit, particularly on the stock market. Therefore, it would be just bad news for the stock market if the Fed announced the curtailment of the QE program or its reduction. However, this did not happen, so stock markets can continue to grow, and stock indexes can continue to set new records. In general, we can say that the Fed, as we expected, took an ultra-neutral position and made it clear that it was not going to force events. As we have repeatedly noted, a strongly increased inflation is not the number one target for the Fed. Rather, the long-term aim for them is to achieve price stability over a long period of time. Now, everyone understands that the recovery of the labor market is in the first place. And the more the number of new cases of coronavirus in the United States increases, the slower the pace of recovery of the labor market and the economy will be. Accordingly, it is simply not advisable to remove the QE program or even start discussing its collapse now. We talked about this in our recent articles, and now the Fed has confirmed all our assumptions. Thus, from our point of view, it will be possible to talk about curtailing the QE program no earlier than at the end of 2021. And even then, the States will be able to avoid a new, full-scale wave of the pandemic.
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