World Socialist Web Site 18 Mar, 2021 07:15 am

Fed pledges to continue flow of ultra-cheap money to Wall Street

Fed pledges to continue flow of ultra-cheap money to Wall Street
Remarks Wednesday by Fed Chair Jerome Powell were aimed at assuring Wall Street that the flow of cheap money will not be cut off, even if inflation rises and the economy grows.

To underscore that the Fed is not going to immediately respond to a rise in prices or a fall in the unemployment rate, Powell said the central bank’s goal is for inflation expectations to be “well anchored” at 2 percent.Asked at his press conference about a possible “taper” in Fed policy, Powell said that any change in the central bank’s orientation would be signalled well in advance.In a response to a question, he ruled out any targeted intervention in the central bank’s asset purchases and said its activity would be across the range of bonds.The crisis came to a halt only through the massive intervention of the Fed, amounting to more than $3 trillion, in which the central bank threw a safety net under all areas of the financial system.

” However, a report on the March crisis, issued last November by the Financial Stability Board, comprised of central bank and finance ministry officials, concluded that while the measures taken by the Fed and other central banks restored market functioning, “the financial system remains vulnerable to another liquidity strain, as the underlying structures and mechanisms that gave rise to the turmoil are still in place.” Powell repeated earlier commitments that the Fed’s purchases of Treasury bonds and mortgage-backed securities at the rate of $120 billion per month, implemented as a result of the financial market crisis of March 2020, will continue until “substantial further progress” has been made in achieving the Fed’s objectives.

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