The Fed, knowing the expectations of the markets, decided last Wednesday 28/7/2021 to maintain unchanged interest rates, while continuing at a steady pace its monetary policy through the purchase of government bonds and securitized mortgage bonds with the always existing monthly rate.
The head of the Fed, Jerome Powell, accepted the fact that the American economy has moved in the right direction, but the momentum does not show that the pre-required and at the same time necessary goals of the Fed have been achieved so that the Fed enters a state of gradual decline of asset purchases (tapering).
by Thanos S. Chonthrogiannis
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In fact, the Fed announced that the implementation of tapering will be delayed. The failure to achieve the necessary and pre-required goals is due to:
1) The labor market is far from the desired levels of full employment,
2) Any increase in prices of goods and services to date comes from non-permanent factors, which discount the reduction of inflation in the coming months.
The fact that the monetary policy of tapering is being implemented has caused the dollar to fall, which was reflected in the fall of the US: DXY index, which reflects changes in the value of the US dollar against the six most important foreign currencies in the world. From 92.97 on 20/07/2021 it fell to 92 on 02/08/2021 (Data Source: https://trusteconomics.eu).
In addition to the fall of the dollar contributed:
1) The announcement of the results for the week of July 17-24, regarding the smallest (in relation to the expected) reduction in the number of applications for the unemployment benefit.
2) The smallest increase in GDP for Q22021 compared to expectations (6.5% Q22021 – 6.3% Q12021).
On the other side of the Atlantic, the positive news of the Eurozone announced by Eurostat with its GDP growing in Q22021 by 2.0%, higher than market expectations, with unemployment reaching a low of 7.7% and with the EU economic climate index remaining on an upward trend for the sixth consecutive month, where in July it reached the historically high level of 119 points, caused the revaluation of €/$ closing at 1.1885, yielding 1% higher profits than in early May.
