Fed Monetary Policy Report: Upside risks to the inflation outlook in the near term have increased


Upside risks to the inflation outlook in the near term have increased,” the US Federal Reserve (Fed) stated in its semi-annual Monetary Policy Report released on Friday.

Additional takeaways

More lasting but likely still temporary upward pressure on inflation has come from prices for goods experiencing supply chain bottlenecks.

Survey-based and market-based measures of longer-term inflation expectations have risen since the end of last year.

Inflation expectations in a range that is broadly consistent with longer-run inflation objective.

Fed institutions at the core of the financial system remain resilient.

Data for the second quarter suggest a further robust increase in demand.

Structural vulnerabilities persist at some types of money market funds and bank loan and bond mutual funds.

On Fed's asset purchase program, in coming meetings the committee will continue to assess the economy’s progress toward goals.

The post-pandemic labor market and the characteristics of maximum employment may well be different from those of early 2020.

Fed prepared to adjust stance of monetary policy as appropriate if risks emerge.

As extraordinary circumstances pass, supply and demand should move closer to balance, and inflation is widely expected to move down.

Spate of retirements spurred by the pandemic will continue to weigh on labor force participation for some time.

Recent readings on inflation expectations indicate inflation expected to return to levels consistent with the committee’s 2% longer-run inflation objective after a period of temporarily higher inflation.

No notable effect on treasury market functioning followed the expiration in march 2021 of temporary changes to the supplementary leverage ratio.

Fed's CIE index at levels 'likely more consistent' with fed's longer-term 2% inflation goal.

Most measures of hedge fund leverage are now above their historical averages.

Market reaction

The Fed report has little to no impact on the US dollar index, as it keeps its recovery mode intact around 92.30, as of writing.

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

EUR/USD treads water just above 1.0400 post-US data

EUR/USD treads water just above 1.0400 post-US data

Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.

EUR/USD News
GBP/USD remains depressed near 1.2520 on stronger Dollar

GBP/USD remains depressed near 1.2520 on stronger Dollar

Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.

GBP/USD News
Gold keeps the bid bias unchanged near $2,700

Gold keeps the bid bias unchanged near $2,700

Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.

Gold News
Geopolitics back on the radar

Geopolitics back on the radar

Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.

Read more
Eurozone PMI sounds the alarm about growth once more

Eurozone PMI sounds the alarm about growth once more

The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Forex MAJORS

Cryptocurrencies

Signatures