By Isaac Cohen*
At the end of its last meeting, last week, the Federal Reserve declared: “if progress continues broadly as expected…a moderation in the pace of asset purchases may soon be warranted.” This means that monthly asset purchases of $120 billion, which started in March 2020, will gradually decrease to conclude “around the middle of next year.” Starting on November 3 at the conclusion of the next Federal Reserve meeting, a monthly reduction of $15 billion will allow the conclusion of asset purchases as projected. This is based on the premise that “progress will continue as expected,” an essential premise because “the path of the economy continues to depend on the course of the virus.”
As demonstrated by the increased contagion caused by the “Delta variant” which hurt job creation in August. There are also other risks, such as the ongoing domestic debate in the United States on raising the federal debt ceiling, or the external turbulence which may emanate from market volatility in China.
The other key indication by the central bank was on the decision to start raising interest rates. If necessary, it may begin in the second half of next year, after the end of asset purchases. The conditions necessary for interest rate liftoff will depend on the strength of the labor market, provided inflation will be on track to moderately exceed 2 percent for some time.
*International analyst and consultant, former Director ECLAC Washington. Commentator on economic and financial issues for CNN en Español TV and radio, UNIVISION, TELEMUNDO and other media.