The Federal Reserve\’s semi-annual monetary policy report: it is necessary to continuously raise the target of the federal funds interest rate

It is reported that the Federal Reserve’s semi-annual monetary policy report shows that the financial situation has been further tightened since June, significantly tighter than a year ago; It is necessary to continuously raise the target of federal funds interest rate; Remain firmly committed to bringing the inflation rate back to 2%; The market liquidity of US treasury bond bonds and other major markets is still lower than the pre epidemic level; To return the inflation rate to 2%, it may take a period of below-trend growth and the weakening of the labor market; Expectations show that high inflation has not become entrenched; The labor market is still extremely tense. Compared with the expected level before the epidemic, the labor supply is seriously insufficient.

Interpretation of this information:

The Federal Reserve has recently released its semi-annual monetary policy report, which suggests that the financial situation in the US has been tightened even more since June, bringing it to a significantly tighter point than it was a year ago. As a result, it is deemed necessary to keep raising the target of federal funds interest rate, as part of its efforts to bring inflation back to its desired 2% level.

One of the main concerns highlighted in the report is the lower market liquidity levels of US treasury bond bonds and other major markets, which are still below the pre-epidemic level. This trend is a challenge for investors, as it could make it more difficult to buy or sell assets without impacting prices.

The report also suggests that policymakers expect that reaching the 2% inflation target may require a period of below-trend growth and weakening in the labor market. This understanding underscores the importance of continued efforts to support the economy as it recovers from the pandemic.

Despite the challenging conditions facing the US economy, there is some reason for optimism. The report highlights that expectations show that high inflation has not become entrenched — that is, inflation has not persisted beyond what is expected in a fleeting wave of price hikes, but instead returns to normal levels after this period of adjustment. Additionally, the report notes that the labor market is still extremely tense and that labor supply is seriously insufficient compared to the pre-pandemic level.

The takeaway from this report is that the Federal Reserve remains fully committed to bringing the economy back to a state of strong growth and stable inflation. While there may be some temporary challenges along the way, policymakers are working hard to ensure that these are overcome and that the US economy emerges from this period of uncertainty stronger than ever before.