Fed Defines “Substantial”

In December of 2020, there was no COVID-19 vaccine, and the pandemic was in full force. The Federal Reserve Board said that it would continue its pandemic era policies until it saw “substantial further progress” in the economy. The goals were 2% inflation and maximum employment. The November policy meeting is stretching into Wednesday, and the American central bank is ready to say that its standards have been met. This means that the Fed will cut down about $120 billion in monthly bond purchases and plan to raise interest rates in the future. The annual rate of price hikes is about 1.3%, but employment has been a little bit murkier. The Great Resignation has caused problems for employers in general, pushing the boundaries of what the Fed would deem acceptable. In short, the Fed does not seem to be willing to wait forever for a full recovery. Gross Domestic Product is higher than it was prior to the pandemic. However, the Fed has to make a judgment call on whether every part of its formula for substantial further progress has been met. While an announcement has not yet been made, analysts are split on whether bond tapering and interest rate hikes are coming by the end of the day.