The recovery is consolidating and generating optimism in the Western world. Its intensity, of course, differs between countries and there are notable uncertainties in the financial sphere. Such as that of the Chinese real estate company Evergrande, a case in which, even if the worst is avoided, there will be repercussions on the strength of the “great engine” that is the Asian economy on the planet. The words of Jerome Powell this Wednesday, after the important meeting of the Fed of the last two days, redounds to a good part of those doubts. The recovery in the United States could have peaked and job creation has not yet exceeded the threshold that would have led to the significant withdrawal of monetary stimulus (tapering) from now on. The current pandemic data there is worse and more worrying, given how relatively lagging the US vaccination is compared to the European Union. There are large percentages of the population reluctant to the vaccine. What happens with the immunization process and its effectiveness will be decisive for the recovery and the monetary and fiscal policy measures in this new context.
Although caution is imposed, it seems that November will be a critical time for the process of withdrawal of stimulus by the Fed, which has been buying 120,000 million dollars in sovereign bonds and mortgages during the pandemic. The data on inflation and the labor market will be decisive. Inflation records, the highest since the 2008 financial crisis, push the tapering materializes before the end of the year. There is growing concern among analysts that inflation will be higher than what was thought in the spring and, in addition, more and more voices believe that inflationary pressure may be more persistent than initially expected. On the other hand, job creation, although good, has not fulfilled the best forecasts. A tightening of the monetary strategy would not help the economy, but a calendar of rate hikes is beginning to be assumed from the end of 2022.
Doubts about the strength of the recovery from the Fed and Jerome Powell were already evident in the Jackson Hole forum a month ago. Now the disturbing news about Evergrande has been added because they are doubts about the Chinese and even the world economy. The energy price situation and its potential negative impact on growth also explain the indecisions of the North American monetary authority. If the weight of uncertainty is not lightened in the coming weeks, the withdrawal of stimulus in the United States is likely to carry over to 2022, probably with a less uncertain outlook. New delay in the promised monetary normalization. It will not be easy to completely withdraw the monetary stimulus for many years. They are still necessary to ensure stability and growth. Of course, the dimension of their actions (bond purchases) will probably end up moderating, but in slow motion. Central banks will continue to play expansive music, albeit with a somewhat lower volume of sound.