AUGUST 2, 2021 – FED HOLDING THE LINE AS GDP POWERS AHEAD
The Fed said last year they would continue bond purchases to stimulate the economy until they saw substantial further progress toward their goals of full employment and stable inflation. At their July meeting last week, the Fed concluded “the economy has made progress toward these goals”, and the progress would be assessed in upcoming meetings. This indicates the Fed may announce plans they will start reducing, or tapering, bond purchases later in the year. The Fed’s next scheduled meetings are scheduled for late September and the first week of November. Fed Chair Powell stated the Fed is not considering plans to raise interest rates, restating the recent surges in inflation are expected to diminish.
Despite the positive economic data, there exists an air of caution. The US economy grew at a 6.5 percent annualized rate in Q2 and exceeded its pre-pandemic size. Growth was up slightly from the 6.3 percent seen in the first quarter, but fell short of expectations of 8.4 percent. The virus variant spreading across the country has raised uncertainty if this level of GDP growth can be sustained into the second half of this year.