new video loaded: Fed Chair Says Some Pandemic Support May Soon Be Slowed
Fed Chair Says Some Pandemic Support May Soon Be Slowed
Jerome H. Powell, the Federal Reserve chair, said that if economic recovery “continues broadly as expected,” the Fed may soon reduce the pace of supportive asset purchases it has made throughout the pandemic.
Asset purchases have been a crucial tool. They were a critical tool in preserving financial stability and market functioning during the pandemic. Since then they have helped to foster accommodative financing conditions that support the economy. The committee discussed the progress towards our goals during our meeting, which concluded earlier today. It also reviewed the asset purchase guidance that the committee adopted last December. The economy has made significant progress towards these goals since then. If the economic progress is continuing as expected, then the committee may recommend a moderated pace for asset purchases. We also discussed the appropriate pace of tapering asset purchases once economic conditions satisfy the criterion laid out in the committee’s guidance. Participants agreed that a gradual tapering process that ends around the middle next year, as long as recovery continues on track, was appropriate. Our high level of longer-term securities will still support accommodative fiscal conditions even after the balance sheet shrinks. We have a more rigorous test for how the timing and pace of asset purchases will affect the timing of interest rates lift-off. We continue to expect that it will be appropriate to maintain the current zero to one-quarter percent target range for the federal funds rate until labor market conditions have reached levels consistent with the committee’s assessment of maximum employment, and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. Half of FOMC participants predict that these favorable economic conditions would be realized by the end next year.
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