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Federal Reserve Reiterates Need for Tighter Monetary Policy

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It is reported that the Federal Reserve\’s semi-annual monetary policy report shows that the financial situation has been further tightened since June, signific…

Federal Reserve Reiterates Need for Tighter Monetary Policy

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.

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

Interpretation of the news:


According to the Federal Reserve’s semi-annual monetary policy report, the financial situation has been significantly tightened since June 2021, more so than a year ago. As a result, the Federal Reserve believes it is necessary to continuously raise the target of federal funds interest rate. This move will help to bring inflation back to the desired rate of 2%.

The report also indicated that the US Treasury Bond market alongside other major markets still faces the challenge of lower market liquidity compared to before the outbreak of the COVID-19 pandemic. This challenge calls for urgent measures to ensure market stabilization and resilience.

To achieve the desired rate of inflation, the report suggests that below-trend growth and weakening labor markets may be necessary. Although high inflation is not entrenched, the labor market remains extremely tense, and there is a serious shortage of labor supply compared to the expected level before the pandemic.

From this report, it is evident that the Federal Reserve reiterates the need for tighter monetary policy to stabilize the financial market. This action is essential to minimize the high levels of inflation experienced recently. Additionally, efforts to stabilize the bond market and other markets should be prioritized to prevent significant instability and potential financial crisis.

The report also sheds light on the fact that the lack of sufficient labor supply and tension in the labor market could slow down the pace of inflation reduction. In essence, the US economy still has a long way to go to fully recover from the impact of the pandemic.

In conclusion, the Federal Reserve’s report on monetary policy shows that economic recovery is still a work in progress. The report highlights the need for tighter monetary policy, stabilization of the bond market, and the need to address the shortage of labor supply. It is, therefore, the role of stakeholders in the financial market, including policymakers, to take appropriate action towards achieving a stable and robust financial future.

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