The Fed said it is winding down a program that helped the economy during the COVID-19 pandemic. Central bank officials said the time has come since the economy is now recovering. They said the program “proved vital” in restoring market functioning, supporting the availability of credit for large employers, and bolstering employment through the pandemic. The Fed plans to sell off those assets overtime to keep markets functioning properly and to reduce any resulting shock to the system.
CNN Business/David Goldman
The Fed will start winding down a program that saved the economy
The Federal Reserve announced Wednesday that it will begin winding down a program that purchased tens of billions of dollars of corporate assets to shore up the economy during the pandemic, CNN Business reports.
In a statement, the central bank said the facility was crucial to businesses during the depth of the recession. But as the economy rapidly recovers, the time to start winding it down has begun.
The program “proved vital in restoring market functioning last year, supporting the availability of credit for large employers, and bolstering employment through the Covid-19 pandemic,” the Fed said.
The Fed currently holds $13.7 billion worth of corporate assets, including more than $5 billion of corporate bonds and another $8.5 billion worth of exchange-traded funds.
That’s a huge amount of money to unwind, so the Fed said it would sell off those assets over time to keep markets functioning properly and to reduce any resulting shock to the system.
“Portfolio sales will be gradual and orderly, and will aim to minimize the potential for any adverse impact on market functioning,” the Fed said.
The corporate assets are in addition to another $7 trillion worth of government debt that the Fed said it will continue to purchase to keep the economic recovery humming. In an April press conference, Federal Reserve Chairman Jerome Powell said it wasn’t time to even “start thinking about thinking about” tapering the purchases of Treasury bonds.
Kitco News/Neils Christensen
Gold price holding its ground following massive U.S. private sector employment growth
The gold market continues to see some stable technical selling pressure even as U.S. companies went on a hiring spree last month, according to private payrolls processor ADP.
Thursday, ADP said that 978,000 jobs were created this past month, significantly beat expectations; consensus forecasts were calling for job growth of around 645,000.
The gold market was already seeing some selling pressure ahead of the data but has not lost much ground in initial reaction to the massively positive employment numbers. August gold futures last traded at $1,895.70 an ounce, down 0.74% on the day.
According to some economists and market analysts, the latest ADP numbers creates some significant upside potential for Friday’s official government employment data. Currently economists are expecting that the nonfarm payrolls report will show that 645,000 jobs were created last month.
“This is a very strong report despite the downward revision to April. The track record alongside non-farm payrolls is spotty but the trend is what’s most important now and it’s clearly improving at an accelerating pace,” said Adam Button, head of currency strategy at Forexlive.com.
Read the full story, here.
Biden spending proposals a ‘mystery’ amid ‘tremendous’ economic recovery: Douglas Holtz-Eakin
Former CBO Director and American Action Forum President Douglas Holtz-Eakin argued that President Biden’s spending proposals are a “mystery” amid a “tremendous” U.S. economic recovery, during an appearance on FOX Business’ “Mornings with Maria.”
DOUGLAS HOLTZ-EAKIN: This has been a mystery to me why there’s all this talk about stimulus. We’re having a tremendous recovery and the reason we’re having a tremendous recovery is this has been a recession unlike any other we experienced. It wasn’t the 20th century where incomes fell. It wasn’t the 21st century where we saw big wealth destruction like the dot com bubble or the financial crisis. What we saw was the coronavirus stopped people from spending. They couldn’t go to restaurants, they couldn’t get on to airplanes, they couldn’t stay in a hotel. And now that that’s receding, the economy is coming back just fine. And the private sector has expanded payrolls throughout 2020 and will continue to do that.
What we’re seeing more than anything else is supply-side shortages. We’ve heard a lot about the supply chain, a lot about the lack of workers. And that’s the only thing holding the economy back. This isn’t a world where we need lots of big government spending to make the economy grow. It’s doing just fine.
[Biden’s proposed budget] doesn’t add up. They’re going to borrow an additional trillion and a half in federal debt over the next 10 years. So you’ve got big government, you’ve got big taxes, you’ve got big borrowing, you have no growth.
And so this is a vision where prosperity is in the government. It’s not a vision consistent with our history and our principles where economic freedom and private enterprise drives the standard of living. It’s a vision of making the government bigger and having people rely on it.
Watch the full interview, here.