Federal Reserve Chairman Jerome Powell said the US central bank was likely to begin tapering asset purchases this year as the US economy would recover from the pandemic, but it would not be in a hurry to raise interest rates.
In his annual speech at the Jackson Hall Economic Policy Symposium on Friday, Powell gave a warning about maximum employment and stuck to the central bank's message that the current spike in inflation was partly due to supply chain disruptions caused by Covid-19 and likely to be transitory.
Powell did not give a specific timeline for the start of the Fed's $120 billion-a-month bond-buying tapering costs. Last year, the program was launched in response to the Covid-19 crisis. According to Powell, while the economy is moving ahead steadily, the Fed will monitor incoming data to analyze risks such as the delta virus variant to affect the progress.
The markets reacted favorably. US stocks rose to a new record high, while treasury yields and the dollar fell.
Powell's remarks were echoed by his number two, Vice Chairman Richard Clarida, even as the central bank's more hawkish wing urged the need to start tampering as soon as possible.
Atlanta Fed President Raphael Bostic said he supported a rapid tapering process so that the economy could stand up. Dallas Fed President Robert Kaplan stated it should start as soon as possible, but a more gradual approach was preferable.
The Fed conference is traditionally held in Jackson Hole, Wyoming, with a view of the Tetons peaks providing a relaxed atmosphere for usually reserved crowds. This year, it took place virtually for the second time amid a new surge of the coronavirus pandemic across the country. This time it was a one-day conference.
Though Powell's speech was the only public part of the agenda, the central bank published several papers that were presented at the symposium. The research ranged from analyzing how expansionary monetary policy help smooth out economic shocks like those caused by Covid-19 to view on a two-speed recovery that is likely to damage developing countries as they fall behind their wealthier peers.
