Federal Reserve strikes dovish tone to calm inflation fears
The Federal Reserve last night reaffirmed its dovish approach to monetary policy, reassuring investors concerned about rising inflation.
Fed vice chair Richard Clarida said the US central bank would be able to curb an outbreak of inflation and ensure a “soft landing” without hampering the country’s economic recovery.
Fears have been mounting among investors about a surge in prices for many consumer and manufacturer goods as global economies begin to emerge from the Covid-19 pandemic.
This in turn has sparked concern that central banks could begin to tighten monetary policy.
While Clarida’s comments will calm some fears, they still reflect a shifting tone from the Fed. A month ago chair Jerome Powell said it was “not yet” time to even consider policy tapering.
Similar sentiment was recorded elsewhere, with European Central Bank board member Fabio Panetta saying the bank should not reduce the pace of asset purchases from next month.
In New Zealand the central bank today held interest rates at a record low, but hinted at a hike as early as September next year.
It comes after Bank of England chief economist Andy Haldane said Britain must avoid inflation “like the plague”.
Haldane, who voted to ease the Monetary Policy Committee’s quantitative easing scheme earlier this month, said it was important the Bank did not do “too little too late”.
The Fed’s comments pushed Asian stocks higher this morning, while the dollar languished near lows last seen in January.