Daily Management Review

Fed announces reduction in asset buyback programme


The US Federal Reserve (Fed) announced at its November meeting that it had begun winding down its stimulus programme for asset purchases - the reduction is expected to amount to $15bn per month against the current volume of purchases of at least $120bn.

Paul Morigi
Paul Morigi
The key rate remained the same, but analysts expect the regulator to start raising it next year, after the end of the quantitative easing programme. So far, fears of the Fed's decisions having the same impact on emerging markets as they did in 2013 are not justified - experts note only an increase in long-term bond yields.

The US Federal Open Market Committee at the end of the November meeting refrained from changing the rate, which was urgently reduced at the start of the pandemic (in March 2020) to 0-0.25%. 

At the same time, the regulator finally moved to the previously promised tapering of the asset purchase programme by announcing a reduction in quantitative easing by $15bn per month ($10bn in government bonds and $5bn in mortgage-backed securities). Currently, the volume of tapering is at least $120 bln a month ($80 bln of government bonds and $40 bln of mortgage-backed securities). Since the beginning of next year, the volume of reduction of the program may be changed depending on the state of the US economy, says the statement of FRS.

Detailed discussion of the pace of such reduction took place at the previous Fed meeting in September, as follows from the transcript of that meeting. Now the watchdog pointed out that the economy has shown significant progress in achieving employment and inflation targets.

In its assessment of the US economy, the Fed again pointed to the slowdown in growth due to an increase in cases of covid this summer, and also noted the risks associated with the pandemic.

Separately, it noted that supply and demand imbalances have had a significant impact on price growth.

source: cnn.com