November 4, 2021

Legal Fed Will Start ‘Tapering’! What Does Powell Say About Interest Rates?

 Meeting broad market expectations, the Federal Open Market Committee (FOMC) has finally announced to begin reducing its bond purchases by $ 15 billion a month.

This includes a reduction in its monthly asset purchase rate of $ 10 billion for Treasury securities and $ 5 billion for mortgage -backed securities starting later this month. With this rate of decline, the purchase is likely to end in mid -2022.

Meanwhile, the US Federal Reserve (Fed) also added on its willingness to adjust purchasing rates in line with changes in the economic outlook.

Based on the current situation, economic and employment activity is seen to remain strong, according to the Fed in a follow -up statement. However, the increase in Covid-19 cases over the summer has slowed the recovery in sectors severely affected by the outbreak. For now, the direction of economic recovery continues to depend on how the coronavirus is contained.

Speaking on inflation, Chairman Jerome Powell said the pandemic -related supply and demand balance as well as the reopening of the economy had led to large price increases in several sectors.

Even so, he is seen to still have the same stance on inflation, saying that such pressure is expected to be only temporary.

In addition, Powell also expressed his views on raising interest rates. According to him, the central bank can still be ‘patient’ to raise rates for now, but they will not hesitate to act if inflation continues to rise high.

Overall, the Fed still kept interest rates unchanged in the 0% -0.25% target range and reduced its monthly bond purchases worth $ 120 billion to $ 15 billion a month.