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Fed sees no need for additional action – VP Bank column

The US Federal Reserve is leaving its monetary policy unchanged. The Fed sees no reason to change its monetary policy. The US monetary authorities emphasize that they will continue the asset purchase program until there is substantial progress in the employment situation and inflation developments. This at least extends the time horizon of quantitative monetary policy, since most recently there was only talk of “several months”.

In view of the requirements of the European Central Bank (ECB), there were expectations that the US Federal Reserve would follow suit. However, since the US economy is doing relatively well in the face of adverse circumstances, Fed Chairman Jerome Powell saw no need to act. Rather, he throws the ball into the field of politicians in Washington. Powell is counting on a successful conclusion of negotiations on another government aid package. The Fed’s calculation is likely that no additional stimulus from monetary policy is required as long as government funds flow,

The Fed is resisting the pull and the calls that can be heard in many places for an increasingly expansionary monetary policy. That deserves respect. There is growing pressure on Washington politicians to finally pass an aid package. Presumably Jerome Powell is serving the financial markets more than if he had announced a further expansion of the already expansive monetary policy today.

Livestream on December 14th, 2020 from 6 p.m .:

With Hans-Werner Sinn, former President of the Ifo Institute.

With Hans-Werner Sinn, former President of the Ifo Institute: Corona and the miraculous increase in money in Europe
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