It’s coming. It’s coming. The Federal Reserve is tapering!
During the Jackson Hole virtual summit, Fed Chair Jerome Powell indicated that the central bank could begin tapering its $120-billion-a-month quantitative easing program by the end of the year.
But it looks like interest rates will stay near zero because there is still “much ground to cover” before the United States economy fully recovers and employment normalizes.
An official comment could be made at the September 21-22 Federal Open Market Committee (FOMC) policy meeting.
“The timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate liftoff, for which we have articulated a different and substantially more stringent test,” Powell said in prepared remarks for the virtual summit.
“Today, with substantial slack remaining in the labor market and the pandemic continuing, such a mistake could be particularly harmful,” he added. “We know that extended periods of unemployment can mean lasting harm to workers and to the productive capacity of the economy.”
He also dismissed the red-hot inflation numbers, insisting that they are transitory and will soon fall to their target rate.
Even if the Fed tapers, it still has a long way to go before tightening is complete. Whatever the case may be, monetary expansion is here to stay, regardless of the taper talk.
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