Fed reaffirms its commitment to

Fed reaffirms its commitment to "do whatever it takes"

Vakıf Katılım

Fed did not change its stance, extended its liquidity operations, emphasized that it would continue easy monetary policy, and revealed that it was not at a stage to evaluate tightening. As expected, there is a timid Fed and the stance on maintaining the continuity of the support provided to the economy is continued as being necessary.

 

Considering that it is an unprecedented economic crisis environment, it is quite normal that Powell is skeptical of the current economic recovery. Because the recovery that is thought to be in the second stage of V may actually be in the first stages of W. The economic course is very closely related to the course of the virus in the USA and if the situation gets worse, there may be a new slowdown activities in addition to the deteriorating economic situation of the household. What is unclear about that wheter the stage 2 of the virus could be under control at this process is unclear. It is clear that Trump will resist to re-clousre of economy, so he underestimated the virus during the normalization phase. As you know, there is an election in the US and the situation of job market and incomes of the people is an important issue.

 

Of course, the Fed is not IMF, but for the outside world, it is very important to extend the duration of liquidity created through swap and repo channels. Within the scope of these opportunities extended until March 31, 2021, Central Banks, which have swap lines with the Fed, will continue to benefit, plus other countries will be able to provide liquidity with repo, in exchange for American bonds. We know Turkey could not create an agreement with Fed for swap lines and with Turkey's weak position in the American bonds, we are one of the countries that will not get the real benefit of this facility.

 

There is a Fed that does not look at the current speed of the economy, but in its future situation after it may be affected in the future. At this stage, their statements that “they are not even at a point to increase the interest” reveal reality. There is more to reach before the pandemic period. The Fed will need to be on the table more so that the economy will remain at this stage of recovery, or will be least affected by any additional damage.

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