Update on Fed Policy & Economic Data Update
Federal Reserve Provides Monetary Policy Update
The Federal Reserve held its annual Jackson Hole meeting on August 27th. Fed Chairman Jerome Powell’s speech made the case for the Fed to start reducing its monthly bond purchases, which were started during the pandemic to keep interest rates steady, increase bond market liquidity, and keep credit flowing. He said the Fed has made progress toward its goals of average inflation running above 2% and maximum employment in the U.S. labor market. While Powell laid the groundwork to start tapering (i.e., reducing) the Fed’s monthly bond purchases, he went to great lengths to make clear tapering is a separate decision from raising interest rates. He warned that raising interest rates to tamper inflation could disrupt the recovery and said the Covid-19 delta variant poses a risk to the economy.
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