This week's Fed meeting decided to keep policy interest rates near zero and the size of QE bond purchases unchanged, significantly raising inflation expectations for this year, while reiterating that the rise in inflation was mainly temporary, but sent a signal that interest rates are more likely to rise two years later, that is, in 2023. Fed policy makers expect a rate hike to come sooner than when the expected interest rate route was announced in March.

On Wednesday, June 16, US Eastern time, the Federal Reserve announced after the meeting that members of the Federal Reserve Monetary Policy Committee FOMC unanimously agreed to keep the target level of the federal funds rate unchanged at 0-0.25%, in line with market expectations. At the same time, the Fed raised two major management interest rates, raising the excess reserve rate (IOER), the upper limit of the federal funds rate range, to 0.15 per cent from 0.10 per cent, and the overnight reverse repo rate (ON RRP), the lower end of the federal funds rate range, from zero to 0.05 per cent.

In terms of interest rate policy, the statement continued to reiterate the interest rate forward guidance issued in September last year, saying that the FOMC "committee's goal will be to achieve inflation moderately above 2 per cent over a period of time in order to achieve average inflation of 2 per cent over a period of time and long-term inflation expectations remain well anchored at 2 per cent."

Like the previous eight post-meeting statements, the Fed continues to pledge to use its "all-encompassing" policy tools to support the US economy.

More than 70% of Fed officials expect to raise interest rates in 2023

The bitmap released after the meeting shows that, like the last bitmap released in March this year, all Fed officials expect interest rates to remain unchanged this year, and for a longer time after 2023, most Fed officials expect interest rates to rise to 2.5%. Above the Fed's long-term target of 2%. What is different from the last bitmap is:

• Of the 18 officials who released the expectationThis time, seven people expect to raise interest rates in 2022.Three more than the number expected last timeThe number of people accounts for nearly 40%.

• Among the 18 people this time,Thirteen people expect interest rates to rise in 2023, accounting for more than 72%.6 more than the last expected rate hike in 2023。

• Of the 13 people who are expected to raise interest rates in 2023, 11 expect interest rates to exceed 0.5% by then.Number of peopleAccount for more than 61%There are 5 more people than those expected last time.Five people are expected to have interest rates of more than 1% at that time.There are 3 more people than those expected last time.Account for nearly 30%。

This means that this time there areMore than 70% of Fed officials expect the Fed to raise interest rates within 2023.，If you raise interest rates by 25 basis points at a timeWell, thenThis time, more than 60% of officials expect the Fed to raise interest rates at least twice from its current level by the end of 2023.。

Keep the current pace of bond purchases without mentioning to reduce QE

The Fed also announced after the meeting that it would keep its current bond purchases of $120 billion a month unchanged, in line with market expectations. The QE of the Federal ReserveThe bond purchase guidelines are the same as those of the previous four meetings., all said: "they will increase their holdings of US bonds and buy at least $80 billion of US Treasuries and $40 billion of institutional mortgage-backed securities (MBS) every month.Until the implementation(monetary policy) of the committeeUntil substantial further progress is made towards the goal of full employment and price stability。”

In the statement after the meeting, the Fed did not give any signal that it would adjust its QE bond purchases, nor did it suggest that the Fed would begin to discuss scaling back QE bond purchases.

According to the minutes of the April FOMC meeting, some officials at the meeting pointed out that if the economy continues to grow, it may be appropriate to start talking about adjusting the pace of bond purchases. This is the first time that the Fed has publicly mentioned in its minutes that it may be time to discuss reducing QE since the outbreak of the new crown epidemic.

But before the meeting, the Wall Street consensus expected that the Fed was unlikely to mention QE reduction in its meeting statement.Wall Street articlesSome economists believe that similar discussions may begin this week, but they are still at a preliminary stage, with details of the $120 billion-a-month bond-buying plan expected to be announced later this year. Goldman Sachs Group economists believe that formal discussions on reducing QE will begin in late August, at the annual central bank meeting in Jackson Hole, and will begin to shrink QE at the end of this year or early next year.

Core PCE inflation expectations rise to 3% this year the median interest rate in 2023 indicates an interest rate hike of 50 basis points

Updated economic outlook data released after the meeting showed that Fed officials raised their GDP growth forecasts for this year and 2023, the year after next, lowered their unemployment forecasts for next year, raised their personal consumption expenditure price index (PCE) inflation expectations for this year, next year and the next three years, and raised core PCE inflation expectations for this year and next.

Fed officials also significantly raised the expected level of the policy rate, the federal funds rate, the year after next. That means they expect the Fed to raise interest rates by 50 basis points from its current level by the end of the year.

Although Fed officialsThis year, PCE inflation expectations have been raised to more than 3%, and core PCE inflation expectations have also reached 3%.，但The year after tomorrowBoth types of inflation expectations are justSlightly above the Fed's long-term average target of 2%。

The median expected by Fed officials is:

• GDP is expected to grow by 7.0 per cent in 2021 and 2.4 per cent in 2023, up 0.5 and 0.2 percentage points from the last forecast announced in March, respectively, and GDP growth is still expected to be 2.2 per cent in 2022.

• The unemployment rate in 2021 and 2023 is expected to be the same as the previous forecast, at 4.5% and 3.5% respectively, and the unemployment rate is expected to be 3.8% in 2022, 0.1 percentage point lower than the last forecast.

• PCE inflation expectations for 2021, 2022 and 2023 are 3.4 per cent, 2.1 per cent and 2.2 per cent respectively, up 1.0, 0.1 and 0.1 percentage points from the previous forecast, respectively.

• Core PCE inflation expectations for 2021 and 2022 are 3.0 per cent and 2.1 per cent respectively, up 0.8 and 0.1 percentage points from the previous forecast, respectively, and core PCE expectations for 2023 remain at 2.1 per cent.

• The federal funds rate is still expected to be 0.1% in 2021 and 2022, and 0.6% in 2023, 0.5 percentage points higher than the last forecast.

Reiterate that inflation due to temporary increases in vaccination to support a strong economy the hardest hit sectors are still weak

In terms of introducing the economic situationSame as the statement of the last meeting in April this year.The statement still says: "Inflation has risen, mainly as a result of temporary factors.”

As stated after the last meeting, this timeTo reiterate，“With progress in vaccination and strong policy support, indicators of economic activity and employment have strengthened, and some of the industries most adversely affected by the epidemic remain weak, but show improvement.善。”

With regard to the epidemic situation of COVID-19, this statementDeleteAs stated in the statement after the first three meetings. "The COVID-19 epidemic has caused great economic difficulties to the United States and the world.”，IncreaseHe said, "Progress in vaccination has reduced the spread of novel coronavirus in the United States.”。

Like the statements made after the previous two meetings, this statement still believes that "part of the economy will rely heavily on the development of the epidemic, including the progress of vaccination." The statement reiterated that the public health crisis brought about by the COVID-19 epidemic "continues to exert pressure on economic activity, employment and inflation, and risks to the economic outlook remain."