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The US Federal Reserve began to roll back quantitative easing, but the dollar fell
The US dollar fell on Wednesday after the Fed announced the beginning of the curtailment of the asset purchase program
Nov 4, 2021
1 min read
Anna BakkerNews analyzer

However, the fall in the US currency may be short-term.

The US Federal Reserve has approved a plan to phase out the asset purchase program. The Fed will cut bond purchases by 15 billion in November and another 15 billion in December.

According to the regulator, such a reduction in the volume of acquired assets "is likely to be advisable every month", although it is ready to adjust the pace of phase-out of purchases, "if it is justified." The process should be completed by June next year.

Against the backdrop of rapidly accelerating inflation, the central bank is taking the first step towards abandoning aggressive economic support measures that were introduced due to the coronavirus pandemic, writes DJ Newswires.

Strong demand for goods, supply chain disruptions and a rebound in tourism activity have pushed annual inflation to its highest level in decades.

Refusal from the policy of asset repurchase does not mean preparation for raising interest rates, Fed Chairman Jerome Powell assured at a press conference. At the same time, the market expects the Fed to raise rates next summer, after the completion of the quantitative easing program, and then again at the end of next year.

The Fed has broken a soap bubble: the US is stopping the "printing press", writes finanz. The world's central banks printed $ 11 trillion in a year and a half, resulting in a surge in assets ranging from stocks to commodities to cryptocurrencies.

The capitalization of world stock markets increased by $ 60 trillion and exceeded 140% of world GDP; oil prices have returned to the level of 2014, gas and coal prices have reached historic highs.

And now, having triggered an inflationary explosion, central banks are unanimously slowing down. The Central Bank of Canada has already curtailed the buyout of assets, the Central Bank of Australia last week, without warning, stopped buying government bonds under the yield control program, lowering their quotes.

In the case of the United States, the reduction in the quantitative easing program is superimposed on the government's plans to sharply increase borrowing in the market.

From December to March, the Fed will invest $ 300 billion in the system, and the US Treasury will place bonds in a net amount of 750 billion after the flow of government debt finally increases.

This means an outflow of liquidity by 450 billion: there will be less dollars in the system, which means that the dollar will rise in price.

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