Takeaways from the FED's MPC speech March 23'

FED chair Powell gave the MPC speech on 23 March 23'. Here are some crucial points from his speech:

On recent events:

    >>> There are some serious difficulties, however, with a small number of banks 

    >>> History is evident that if such events are un-attended, they may have contagion to healthy parts of the financial system as well 

    >>> Hence, the FED working with Treasury and FDIC to strengthen confidence in the banking system

    >>> Together, these institutions have created a “bank term funding program” that works alongside the discount window. This would allow banks to get access to the required liquidity 

Monetary Policy: 

    >>> Fed funds rate risen by 25bps 

    >>> Inflation remains high and the labour market remains tight 

    >>> US growth in the previous year had been below the long-term trend 

    >>> Consumer spending appears to have picked up this quarter, however, it may be seasonal 

    >>> Housing sector remains weak owing to higher rates 

    >>> Interest rates have also been affecting business fixed investment decisions 

    >>> Median growth forecasts are below long-term median growth rates for coming quarters 

    >>> The issue with labour market tightness remains - Job vacancies are still high - demand of workers succeeding its supply 

    >>> Median projections for inflation by board members show attainment of 2% levels by 2025 

    >>> On the good side, the broad range of surveys has shown that the longer-term inflation expectations are well anchored 

    >>> Quantitative tightness continues with FED reducing its security holdings 

    >>> On forward guidance, the recent events in the banking system may result in tighter credit constraints for housing and businesses and, hence, are likely to effect economic outcomes as well. However, owing to the recency of the events, it would be too soon to comment on its overall effect on the monetary policy 

    >>> FED would be scrutinizing the upcoming data and accordingly, may firm up rates in the upcoming meetings 

    >>> If the economy behaves in line with the projections of the board members then the terminal rates would be 5.1% by the end of 2023, 4.3% by the end of 2024 and 3.1% by the end of 2025

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