Biden's speech, which is expected to give details of the financial stimulus package tonight, will be important. The financial package, which is expected to be approximately 2 trillion USD in size, is predicted to include funds for vaccine distribution, small businesses, schools, state and local governments, as well as increasing paychecks from USD 600 to USD 2000. The fact that the Senate is 50-50 in the new term makes it a little easier for Biden and for some Republicans to support the package, but there is still a possibility of opposition to the package.
Financial expansion expectations have also added weight to the expectations of warming the economy in terms of inflation. This is true if it can create a demand-driven price pressure, but the general inflation movement is now explained more by price pressure and cost increases. Paychecks are important for households to take a breather, and Americans will of course have the ability to contribute to the economy on demand if they earn money. But they've spent a lot of their savings, and their first priority will be putting their savings back on. After all, there is also a difference between regular income and outside help. On the other hand, what the package offers is very important in terms of supporting SMEs and local businesses. Small businesses that cannot protect themselves in the pandemic and a significant part of them have to close down constitute the most important negative in terms of employment. Incentives are important to maintain employment in small regions.
The statements Powell will make are important in terms of clarifying the "tapering" concerns that have increased recently. With 10-year break-even inflation, Treasury yields raised the question, "If the recovery occurs early, can the Fed raise interest rates earlier?" But the key detail is, "if the revival happens." We do not follow a natural inflation movement, even if this becomes natural, the Fed does not have a linear target of 2% and will allow inflation to hover above the target for a while. In the damage assessment phase of the economy, it will take time to become fully operational even if the epidemic is brought under control after vaccination. The Fed has to decide according to the stages of the crisis. In 2013, we had an important turning point when Bernanke first stated that "incentives could be reduced" in the period when there was no interest rate hike. The Fed needs to see new signs, and pandemic dynamics and inflation are yet to reveal these new evidence.
Meanwhile, as EUR negative development; The coalition in Italy is at the stage of disintegration… An important development for Lagarde, who says that they are following the EUR levels carefully.
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