(RightWing.org) – Right now, the Federal Reserve is still running in emergency mode – but tech markets surged last week as the Fed at last signaled that COVID measures will end soon.
— Federal Reserve (@federalreserve) June 16, 2021
On Wednesday. June 16, the Federal Reserve kept its base rate at just over zero but raised two key rates for banks. Now, banks will get a higher rate of interest on reserves held by the Fed, while investors will gain from overnight lending. The Fed also changed its forecast for a base rate rise, bringing the date forward from 2023 to 2022. That’s a strong signal that it’s preparing to return to a more normal way of doing business and expects the economic recovery to continue.
The Fed’s move seems to have sparked a surge in bank deposits and investments. It also pushed up yields for Treasury bills. On Thursday, the tech-dominated NASDAQ jumped by almost one percent, coming within 13 points of its record high.
As a way to boost the economic recovery, the Fed’s actions make a lot of sense. By bringing forward the likelihood of a base rate rise, it’s encouraging people to make big purchases now while borrowing is cheap. Increased sales of homes, cars and expensive appliances will create economic activity and turbocharge the retail sector. As long as Biden doesn’t tax businesses to death, this is all good news.
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