The Federal Reserve decided today, as expected, to leave US interest rates unchanged at zero. The volume of monthly bond purchases, which stands at about $ 120 billion, will not change in the meantime.
Following the announcement, major stock indices on Wall Street are declining.
The yield on 10-year US government bonds rises to 1.54% and the dollar strengthens by 0.4% -0.7% against major currencies.
Fed leaders reiterated that the jump in the inflation rate is temporary but raised the annual inflation forecast to 3.4% compared to 2.4% at their previous meeting in March, estimating that interest rates will rise at least twice in 2023.
11 out of 18 FOMC (Open Markets) companies now estimate that interest rates will rise at least twice in 2023. In March this year, Shiva estimated that only one interest rate hike would be required.
The Fed noted that they want to see further significant progress in the recovery rate of the U.S. economy before narrowing the bond buying program.
Nadav Ofir, a global markets strategist in Bank Hapoalim’s trading room, notes in response that “the tone of the Fed’s announcement seems to be more positive, with an emphasis on improving the labor market and the US economy, in light of the vaccination program. Compared to four members who rated it in March this year.
The Fed’s growth forecast for the US economy in 2021 has also improved and now stands at 7%, compared to 6.5% before. “
“We reiterate our assessment that as the US economy continues to improve in light of the decline in the negative effects of the Corona virus, interest rates are expected to rise sooner than expected, and we expect to see at least one rate hike during 2022. Moreover, despite recent yields (in recent days “It is expected that by the end of 2021 the yield on ten-year government bonds will be 2% (now 1.54%)”.