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Friday, December 3, 2021

Federal Reserve Bank Moving Towards Ending Stimulus Checks: Says Scaling Back In Line With Improving Situation

The 2-day policy meeting of the US Federal Reserve concluded on Wednesday. It announced plans to steadily scale down the $120B bond-buying program. This move, experts say, is a sure sign that the central bank is stepping back away from the pandemic stimulus check for the economy in general and businesses in particular.

This is the first major step taken by the central bank to reduce its historic levels of support to the markets and the American economy since the pandemic.

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The Federal Reserve clarified that it would slow down its program to purchase bonds by $15B each month, with $5B mortgage-supported securities and $10B securities. It is also prepared to adjust the speed of purchase depending on the economic scenario.

The Chairman of the Federal Reserve, Jerome Powell, announced that the Bank would go slow on the support but did not mention any imminent hike in bank rates.

At the beginning of the COVID-19 pandemic, the central bank had pared interest rates down to almost zero and had bought securities for $120B to prevent an impending collapse.

Ending The Covid-19 Stimulus Check

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The Federal Bank feels that it isn’t necessary to continue stimulus check support as there has been a gradual turnaround in the economy. But the gradual withdrawal of support will hopefully mean that the stimulus check amount lasts a little longer, due to lower inflation rates, which stand at 5.4%. at present.

It could also mean an increase in rates of interest, though it is not imminent, according to the central bank. It instead believes that the global logjam in the supply chain has a large role to play in inflation, and increasing tax rates could not solve the problem.

But prices will continue to be high, warns the Federal chief. That would mean that stimulus check support will run out faster.

As of now, only the Child Tax Credit stimulus check is being paid by the federal administration. The enhanced unemployment stimulus check was stopped in September, while chances of a 4th stimulus check appear dim at present with the federal administration preoccupied with the infrastructure and social spending bills. It has been that states have utilized federal funds to give stimulus checks to those of the population who are desperately in need of help.

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