Powell Gives Emerging Markets an Even Longer Leash
Asian countries from Indonesia to South Korea can ease without fear of a sharp Fed pullback, at least in 2021.
Easy money is here to stay, for a year at least.
Photographer: Dimas Ardian/BloombergThe Federal Reserve just extended Asia's free monetary ride for at least another year. By removing the prospect that massive easing will be wound back anytime soon, Washington has given the region’s officials license to push interest rates even lower for longer.
On Wednesday, the Federal Open Market Committee tied the enormous bond purchases at the heart of quantitative easing to the central bank’s broader goals of cranking up inflation and achieving maximum employment. The implication is that QE should no longer be seen purely as an emergency response to the pandemic. By dropping language that bond-buying will be a feature over “coming months,” the timeline is, in theory, now limitless. Attracting less attention, but vital to Asia: Chair Jerome Powell extended two separate programs designed to ease a global shortage of dollars and smooth the functioning of the market for U.S. Treasuries.