Jerome Powell: Fed may reduce stimulus sooner than expected

NS Central bank announces tapering its monthly asset purchases at its monetary policy update earlier this month, cutting bond purchases by $10 billion in Treasury securities and $5 billion in mortgage-backed securities. organ.

But this pace may no longer be relevant, Powell suggested.

“At the moment, the economy is very strong and inflationary pressures are high and therefore, in my view, looking at the package taper Powell said.

“We will discuss increasing the clutch speed,” at the upcoming December meeting, he added. The central bank will release and update its policies on December 15.

Until then, economists – at the Fed and elsewhere – will have a different view of the US labor market, with the November jobs report due on Friday. And the public may also know more about the new Omicron variant of the coronavirus.

It’s about learning about transmissibility, the ability of existing vaccines to work against it, and about the severity of illness if acquired, Powell said.

“Then and only then can we make an assessment of the impact on the economy,” he added.

Either way, The stock market doesn’t like to hear that, and major US indexes extended their losses following Powell’s comments. Meanwhile, yields on 10-year Treasuries have fallen to lows as interest rate expectations change.

Stop saying ‘temporary’

NS high prices during recovery means the Fed’s inflation test has been met, and that’s why the central bank is looking at accelerating the taper.

“Overall, the higher prices we’re seeing can be traced back to the pandemic,” Powell said. But gains are now broader and upward pressure on inflation is no longer isolated, he added.

But speaking of inflation, Powell made another big statement: Stop using the word “transient,” one of the pandemic buzzwords to describe inflation.

The Federal Reserve uses “transient” to describe the jump in prices during Covid, which the central bank believes is temporary. While it may sound like it’s short-term for the moment, the price has been rising for a while.

The traditional meaning of “transient” is not what the Fed thinks it means at all. According to the central bank, temporary means it won’t leave any mark on the economy once the trend reverses again…whenever possible.

“Everything is temporary. Life is temporary,” Senator Pat Toomey of Pennsylvania said during Tuesday’s hearing.

“Perhaps this is a good time to step back from that and explain what we mean,” said Fed Chairman Jerome Powell.


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