Fed Officials Continue to Signal Tapering is Not Happening Soon

The Chairman of the U.S. Federal Reserve, Jerome Powell, has on Monday expressed no intention to begin tapering very soon as the economy continues to recover from the Coronavirus pandemic.

Powell reiterated the central bank’s commitment to supporting the economy during recovery, as he was speaking in front of the House of Representatives’ Select Subcommittee on Coronavirus.

“We at the Fed will do everything we can to support the economy for as long as it takes to complete the recovery.”

Powell believes that the U.S. economy has made improvement, but did not refer to this progress as the targeted substantial further progress that the central bank has been talking about.

He has, however, pointed to the expected high growth rate of 7% in 2021, which would be the highest for the U.S. since 1984.

Powell also told lawmakers that the high inflation is due to transitory supply effects, expecting it to be temporary, explaining that the inflation is expected to drop back toward the 2% target.

As for the labor market, the Fed Chair said that it remains uneven with the unemployment rate understating the shortfall in employment due to the coronavirus crisis.

Powell’s message came relatively in contrast with remarks by the President of the Federal Reserve Bank of Dallas, Robert Kaplan, who expressed his support for the Fed gently taking its foot “off the accelerator sooner rather than later,” in a way that would allow the central bank to manage these risks and avoid having to press the brakes down the road.

But the New York Fed President John Williams has expressed a message that was more in line with Powell’s, saying that it remains too early to change the current monetary policy, as the economy is clearly improving at a rapid rate. “The medium-term outlook is very good,” Williams emphasized.

“But the data and conditions have not progressed enough for the FOMC to shift its monetary policy stance of strong support for the economic recovery.”