Powell: Fed on Track to Slow Aid for Economy
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Started by metmike - Aug. 27, 2021, 12:53 p.m.

Powell: Fed on Track to Slow Aid for Economy Later This Year

The Federal Reserve will start dialing back its ultra-low-interest rate policies this year as long as hiring continues to improve, Chair Jerome Powell said Friday, signaling the beginning of the end of the Fed’s extraordinary response to the pandemic recession.

https://www.usnews.com/news/business/articles/2021-08-27/powell-fed-on-track-to-slow-aid-for-economy-later-this-year

The Fed's move could lead, over time, to somewhat higher borrowing costs for mortgages, credit cards and business loans. The Fed has been buying $120 billion a month in mortgage and Treasury bonds to try to hold down longer-term loan rates to spur borrowing and spending. Powell's comments indicate the Fed will likely announce a reduction — or “tapering” — of those purchases sometime in the final three months of this year.

In a speech given virtually to an annual gathering of central bankers and academics, Powell stressed that the beginning of tapering does not signal any plan to start raising the Fed’s benchmark short-term rate, which it has kept near zero since the pandemic tore through the economy in March 2020. Rate hikes won't likely start until the Fed has finished tapering its bond purchases.

But Powell said inflation has risen enough to meet its test of “substantial further progress” toward the Fed's goal of 2% annual inflation over time, which was necessary to begin tapering. There has also been “clear progress,” he said, toward the Fed's goal of maximum employment.

Comments
By joj - Aug. 28, 2021, 10:06 a.m.
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Once again the bears were caught offsides.

Powell's willingness to proceed with tapering was supposed to cause a sell off.  It was dubbed the "taper tantrum" in 2013.  Of course, when everyone is looking for a selloff then .... boom to the moon Alice.  


By metmike - Aug. 28, 2021, 12:50 p.m.
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Thanks joj!

Other opinions please.

By cutworm - Aug. 29, 2021, 10:04 p.m.
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"Powell stressed that the Fed's tapering ......does not signal that it plans anytime soon to start raising its benchmark short-term rate,"

old saying, "The raising of interest rates will not be policy until it is denied 3 times"

JMHO

By MarkB - Aug. 29, 2021, 11:36 p.m.
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As the "FEDs" are buying up more debt, to what ends are they hoping for? The FEDs are NOT an official government agancy. Yet seem to have so much authority. And apparently, a lot of wealth and clout.