The Federal Reserve could speed up its plan to withdraw economic support as soon as December as it tries to make sure that rapid price gains don't last, according to the Federal Reserve chair.
The Fed has been buying government-backed securities for a long time in order to keep money flowing into the financial markets. The purchases were to be slowed by 15 billion per month. That would have ended the program in 2022. Mr. Powell said on Tuesday that the process could be sped up, cutting down on how much juice the Fed will add to demand.
The economy is strong and inflationary pressures are high, according to Mr. Powell. At our November meeting, we announced that we would be wrapping up the asset purchases a few months sooner.
Mr. Powell said that the Fed will discuss slowing bond purchase faster at its upcoming meeting in a couple of weeks, and that the Fed will get a better sense of the new Omicron variant of the coronaviruses, a fresh labor market report and a new reading.
The Fed will hold its next policy meeting in December.
Mr. Powell made it clear that it was too soon for Fed policymakers to tell how big the new variant will be, since it will depend on how easily it is transmitted and whether it causes more severe disease.
He said that experts told him that they would know a lot about those answers in a month. We will know something within a week or ten days.
He said that it is a risk and not really baked into the forecasts.
At a complicated moment for policymakers, the challenge of Omicron might pose a hit. The economy has boomed back this year, and hot demand has collided with supply chains to push inflation sharply higher. The central bank has been trying to change its policy so that it can raise rates next year if inflation proves more stubborn than expected, as it has been working to remove its economic help as price gains remain stubbornly high.
Mr. Powell said that the higher prices are related to the supply and demand imbalances that can be traced back to the Pandemic and the reopening of the economy. I think the risk of higher inflation has gone up.
If the new variant continues to roil supply chains even as it keeps workers at home and prevents a full labor market recovery, it could put the Fed in a tough spot. Central bank policymakers are supposed to keep prices stable.
