The start of tapering, the reduction of Fed monetary stimulus, is “possible” by the end of the year. But too premature intervention could prove to be “very damaging”, given the climate of uncertainty fueled by weaknesses in the US economy and the proliferation of the Delta variant.
Federal Reserve Chairman Jerome Powell said this in his speech at the Jackson Hole Banking Symposium. Powell, however, did not provide a precise roadmap for the easing of purchases by the Fed, amounting today to 120 billion dollars a month, and stressed that the so-called tapering “is not a direct signal of a near increase in interest rates” .
Loading…
In short, the line remains that of prudence in the face of the unknowns that remain in the background. Current inflation is causing “concern” for the international economy, while the Covid pandemic threatens immediate recovery. US stocks reacted to Powell’s words by going higher, with the Dow Jones climbing 0.5%. The dollar is down, with the euro returning to 1.18 against the greenback and now trading at 1.1801. The European stock exchanges cleared up after a somewhat stiff start, with Milan rising to + 0.3%.
Economy improves, but the Delta variant worries. Inflation will return to 2%
The scenario facing the US economy, and the Fed, remains uncertain. Powell noted the progress of the labor market, “improved more than expected”, but reiterated that unemployment is still too high. Without forgetting the macro-unknown of Covid and its Delta variant, with immediate risks for a full-scale recovery. “The pandemic – said Powell – remains a threat to growth and the Delta variant creates short-term risks”. As for inflation, Powell says he is optimistic, pointing out that the jump in prices is temporary and the value will return to its 2% target.
The US economy, the Fed number one pointed out, remains on the “right path” to recover from the pandemic thud, thanks to the combination of “high levels of employment and participation, widely shared wage benefits and inflation close to our goal of price stability ‘.