Paul Harmaan

Fed to Not Take Any Action Despite the Economic Concerns:

As per surveys held by CNBC, the concerns related to the economy are growing by the day. People and other people on the Wall Street believe that the Fed should take some actions to ensure that the economy is taken care of, but it looks like the Federal Reserve will not act in 2021.

There has been a rise in the number of people who believe that the Federal Reserve should reduce the stimulus for the economy. A survey in March had predicted that the Federal Reserve would continue the asset purchase of 120 Billion dollars till October. Still, as per the survey of this month, it won’t happen until January 2022. As far as the rate hike is concerned, the survey respondents believe it will not happen any time before December 2022.

The survey’s response was clear, but still, a majority of them, 64% to be exact, believed that the asset purchase by Fed is not needed for the market to function. At the same time, 65% of people believe that the Fed doesn’t need to aid the economy.

The survey also asked the people how the fiscal stimulus by the Biden Government should be responded to by the Fed. Most people wanted to cut back the asset purchase and get the rates up earlier than the planned rates.

According to John Ryding, Chief Economic advisor at the Brean Capital, the Fed did not say anything related to the appropriate fiscal policy. But it would not be wrong to make changes to their monetary policy based on the changes in Fiscal Policy. However, nothing is being done by the Fed regarding this matter.

People Believe in the Words of the Fed

The recent words said by the Chairman of the Fed have succeeded in convincing the people that the markets will remain well even though the fear regarding inflation is on the rise. The survey has underlined the extent of the effect of the words of Jerome Powell.

A growth of more than 6.5% in the economy is expected by the respondents, along with a 4.9% decline in the unemployment rate. As far as inflation is concerned, it might rise by 2.5%.

Kathy Bostjancic said that it seems that the Fed is willing to let the economy run hot to get broad-based as per the new policy framework. The inflation in the coming days is also not huge or constant.

The new framework would be positive for the stocks as per the forecasts but would not be the same for bonds. It would be interesting for investors as it can lead to many changes in investing. A whopping 70% of the respondents think that the value of the stocks is more than what should be based on their outlook for the growth of earnings and the economy.

The restoration of the economy is constantly increasing, but inflation and the pandemic are still a risk for it. Other than that, the plan of Biden increasing the taxes and the people not taking vaccines is now also among the most significant risks.

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