Fed Chair Says Some Pandemic Support May Soon Be Slowed

Fed Chair Says Some Pandemic Support May Soon Be Slowed

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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.

Our asset purchases have been a critical tool. They helped preserve financial stability and market functioning early in the pandemic, and since then, have helped foster accommodative financial conditions to support the economy. At our meeting that concluded earlier today, the committee continued to discuss the progress made toward our goals since the committee adopted its asset purchase guidance last December. Since then, the economy has made progress toward these goals. If progress continues broadly, as expected, the committee judges that a moderation in the pace of asset purchases may soon be warranted. We also discussed the appropriate pace of tapering asset purchases once economic conditions satisfy the criterion laid out in the committee’s guidance. While no decisions were made, participants generally view that so long as the recovery remains on track, a gradual tapering process that concludes around the middle of next year is likely to be appropriate. Even after our balance sheet stops expanding, our elevated holdings of longer-term securities will continue to support accommodative financial conditions. 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 lift-off, for which we have articulated a different and substantially more stringent test. 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 forecast that these favorable economic conditions will be fulfilled by the end of next year.

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