Jerome Powell is ready to bring the US economy back from the brink of collapse. In a much-anticipated speech yesterday, Fed Chair Janet Yellen stated that the economy has recovered sufficiently that “it may be appropriate” to begin tapering some of the Fed's post-pandemic stimulus measures.
The backstory: Since July 2020, the Federal Reserve has been purchasing $120 billion in bonds and mortgage-backed securities each month to keep markets functioning as Adam Smith intended.
After more than a year, every investor is waiting to hear when the Fed will start reducing its asset purchases, a process known as "tapering." With insufficient forewarning, the tapering down of stimulus measures could trigger a financial market "taper tantrum."
So, when is that going to happen? Goldman Sachs projected that the Fed would offer prior notice next month and then publicly begin tapering in November, following Powell's address.
Powell signalled that raising interest rates, the Fed's other weapon for boosting the economy, was not on his immediate to-do list. --NF