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Fed Supports Interest Rates and Signals Ending Stimulus Coming Soon – Monetary Policy

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Fed Supports Interest Rates and Signals Ending Stimulus Coming Soon - Monetary Policy

The US Federal Reserve System, led by Jerome Powell (pictured), as expected, kept its key interest rate in the range of 0% to 0.25%.

In addition, it was decided to maintain the current rate of asset purchases at a level equivalent to USD 120 billion per month. These amounts are split each month into $ 80 billion in Treasury bonds and $ 40 billion in mortgage-backed securities.

Nevertheless, signaled what was expected of the “tapering off” (the beginning of the phasing out of incentives) when it was said that “soon it can be guaranteed” a slowdown in the pace of debt purchases.

“If good progress continues as expected, the committee believes that such a slowdown in asset purchases will soon be guaranteed,” the Federal Open Market Committee (FOMC) emphasizes.

Market watchers expected the Fed to keep interest rates at current record lows, but they were very much looking forward to what would be announced regarding this pandemic-era stimulus program.

There was widespread agreement that the US central bank could announce the start of a “ taper ”, but there were those who believed that the Fed would postpone this slowdown in debt purchases, as the labor market was not yet resilient and the specter of permanent inflation was fading away. The Fed is now dispelling doubts by announcing that stimulus cancellation will be coming soon.

But “while the announcement of the ‘cut’ could probably have happened in November, the fact that the Fed did not do so today suggests that the committee is still blue. [uma postura mais branda, acomodatícia]Bleakley Advisory Group investment director Peter Boquvar told CNBC. However, Jefferies chief strategist David Zervos pointed to the same source that Powell revealed the ‘slightly bigger falcon’ side (not as soft) as he has recently disclosed at today’s press conference …

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wise Owl

Powell is known to have always taken a more hawkish stance, not least because he did not advocate tightening monetary policy in the name of financial stability, but he also advocates ideas that lean more towards the dovish side, and therefore it is considered a person. in the medium term.

When Powell was elected Fed chairman, Richard Fisher, former Dallas Fed chairman, said the new leader was “neither a hawk nor a dove.” “I used to say that we all want to be wise owls. And I think Powell fits very well into that category, ”he then emphasized in statements to the New York Times.

GDP revised downward while inflation is up

Today was also central bank day. update your forecasts for economic growth, employment and inflation

“With progress in vaccinations and strong support for policy-proposed measures, both economic activity and employment rates continued to strengthen. The situation in the sectors most affected by the pandemic has improved in recent months, but the rise in the incidence of covid-19 has slowed its growth. recovery, “says the Fed.

As a result, the central bank revised its estimate of GDP growth in 2021 by 1.1 percentage points, which is now 5.9% (versus 7% projected in June). For 2022, the Fed has revised upward by 0.5 percentage points its forecast for GDP growth, which is now 3.8%.

The unemployment rate is expected to be 4.8% this year, up 0.3 percentage points from last June’s estimates.

“Overall, financial conditions remain favorable, partly reflecting measures to support the economy and the flow of loans to US companies and families,” the report said.

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The Fed also points out that the direction of the economy continues to depend on the trajectory of the virus. “Advances in vaccination programs should further reduce the economic impact of the public health crisis, but risks to the economic outlook remain,” he warns.

Regarding inflation, he says that “it is high mainly due to transitional factors,” as he has repeatedly pointed out.

The FOMC has reiterated that it aims to achieve maximum employment and inflation rates of 2% over the long term. Since inflation is consistently below this target, he said, the committee assumes that inflation has moderately exceeded 2% for some time, so that inflation averages 2%.

This announcement reflects a new central bank strategy that allows inflation to exceed 2% after periods when it falls below this target. Remember, this change was announced by Powell. last August

The Fed revised its inflation forecasts for this year by 0.8 percentage points to 4.2%. But growth is expected to slow in the next two years.

Half of the Fed’s members expect interest rates to rise in 2022.

Another market focus on this Fed meeting focused on the “dot chart” – a map that shows how each central banker assesses changes in key interest rates.

And this map shows that half of the members of the Federal Reserve System expect interest rates to rise as early as next year.

Thus, nine out of 18 FOMC members expect an interest rate hike in 2020, while only seven had such a forecast in June.

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All but one participant expect at least one key rate hike by the end of 2023, with 13 of them expecting two hikes by 2021.

Powell says that removing incentives is not synonymous with raising interest rates.

Jerome Powell, speaking after the Fed announced its monetary policy decisions, reiterated that the “tightening” “is not an immediate sign” of an increase in key interest rates.

Thus, the Fed chairman said that the removal of incentives is not synonymous with “timing” to raise the federal funds rate.

Powell, who is expected to remain in charge of the central bank for another term, also said the “phase-out” would be advisable to end around mid-2022.

However, the Federal Reserve leader also said at a press conference that many Fed members are convinced that employment in the country already meets the standards of the central bank for “significant further progress.”

When asked what impact the September labor market data might have on future interest rate hikes, Powell replied that he was not looking for specific numbers, but rather “cumulative progress.”

“It doesn’t take me a bombastic, impressive, and ultra-reliable report” to raise interest rates. “You will need a good enough employment report to feel like you passed this test,” he said.

“Many members of the committee believe that the test of significant further advancement in employment has already been passed … As for me, I think it is almost passed,” he said.

(news updated at 20:58)

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Economy

Bitcoin Down 87% On Binance US Platform – Executive Digest

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Bitcoin Down 87% On Binance US Platform - Executive Digest

An algorithm flaw on the Binance platform caused users in the US to see a false 87% drop in Bitcoin this Thursday morning to $ 8,200.

The transaction volume for that minute was 592.8 bitcoins, which is only $ 40 million at current price.

The Exchange immediately fixed the bug.

“One of our institutional partners explained to us that there is a bug in the algorithm. We are investigating what happened. The situation has been resolved, “says an email sent by Binance USA.

This is not the first time a crypto-asset platform has encountered this kind of error.

Earlier this month, DeFi’s platform, Synthetify, was forced to shut down for a while shortly after its debut due to a “bug” in the Pyth Network, a pricing channel maintained by some of the world’s most famous trading companies.

Pyth already made the same mistake in September, showing a 90% drop in bitcoin share.

Also a month ago, decentralized financial platform DeversiFi saw $ 24 million “slipped out of his hands” after that amount was paid in the form of a $ 100,000 transaction fee in Ethereum.

Later, the exchange managed to recover 7,626 Ethereum units using a miner.

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Powell’s scandalous operation prompts Fed to ban high-level officials from buying and selling shares – markets

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Powell's scandalous operation prompts Fed to ban high-level officials from buying and selling shares - markets

“A robbed house, locks on the door.” THE The US Federal Reserve System (FRS) has decided to tighten rules for trading in capital markets by senior officials after it became known that the president of the institution, Jerome Powell reportedly sold the $ 5 million shares he held on a personal level last October, ahead of a Wall Street sell-off.

The new rules, announced this Thursday, will ban the purchase of certain securities, restrict active trading and require more frequent reporting and public disclosures, the Fed said.senior officials can only purchase diversified investment vehicles such as mutual funds, barring them from investing in stocks, individual and agency bonds, or derivatives.

“These tough new rules raise the bar to convince the public that our employees are focused only on the public mission of the Federal Reserve,” Jerome Powell said in a statement on the agency’s website.

Starting in the next few months, the Fed’s top management will have to give advance notice 45 days to buy and sell bonds, obtain prior approval and hold the investment for at least one year. In addition, movement during periods of heightened stress in the financial market is not permitted.

Jerome Powell reportedly sold between $ 1 million and $ 5 million in Vanguard Total Stock Market Index Fund on October 1, 2020. pandemic. In addition to this deal, there were other sales with no specific deadlines.

The Wall Street Journal reported that a Fed source indicated that the financial transaction was compliant with central bank regulations and was approved by the Office of Public Ethics.

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Economy

Diploma for limiting the fuel surcharge valid tomorrow

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Diploma for limiting the fuel surcharge valid tomorrow

NO documentstay decisive “The ability to set maximum marketing margins for simple fuels”, an initiative of the government, currently adopted by the Assembly of the Republic.

Thus, the diploma states: “regardless of the declaration of the energy crisis provided for in the previous numbers, for reasons of public interest and to ensure the normal functioning of the market and consumer protection, a margin may be established, in exceptional cases, in any commercial components that make up the retail the price of regular fuel or bottled LPG ”.

According to the law, which amends several decrees establishing general principles regarding the organization and operation of the National Petroleum System, the “maximum margin” can be “determined for any activity in the value chain of ordinary fuel or bottled LPG. set by the order of the members of the government responsible for the economy and energy, at the suggestion of the energy services regulator and after consultation with the anti-monopoly body. “

The diploma also specifies that “the maximum fields indicated in the previous numbers should be limited in time.”

In July, the government approved in the Council of Ministers (CM) a proposed law that would limit fuel sales margins by decree if it deems it too high “without justification,” according to the Minister of the Environment.

At a press conference, João Pedro Matos Fernández said that this diploma, which also applies to gas cylinders, will later be sent to the Assembly of the Republic, stressing that this measure will be “limited in time.”

The purpose of the law is to “give the government a tool to allow, when it is proven that the margin on the sale of fuel and gas cylinders is unusually high and unreasonable, this right, by decree, to limit the same margin,” the government official said. …

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“After approval [a proposta de lei]and the government, always listening to ERSE [Entidade Reguladora dos Serviços Energéticos] and the Competition Authority, by its decree, always for a limited period of time, which, I believe, is a month, two months, administratively sets the maximum margin for the sale of fuel, ”said João Matos Fernández.

The government official recalled that this markup “is also the sum of the markups associated with transportation, storage, wholesale and retail,” and these reference values ​​”continue to be calculated by ENSE on a daily basis.”

“As soon as this bill is approved, we will have this tool at our disposal,” he said, assuring that today “the state has no opportunity” to interfere in limiting prices for fuel and gas cylinders.

The initiative has been criticized by industry associations, which accuse the government of wanting to deflect attention from the weight of taxes on fuel prices.

Read also: Fuel and energy. Concerned parties are asking the government to take additional action.

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