The chairman of the U.S. Federal Reserve said Friday that the nation’s economy continues to recover from the recession caused by the COVID-19 pandemic, and that it might be time to consider scaling back some emergency programs the central bank implemented to stimulate that recovery, though he indicated that might not happen soon.
In a speech delivered virtually to an annual economic conference in Jackson Hole, Wyoming, Jerome Powell said the Federal Reserve remained committed to supporting the economy “as long as is needed to achieve full recovery.”
The Fed has been buying $120 billion a month in mortgage and Treasury bonds to try to hold down longer-term loan interest rates to spur borrowing and spending. Powell’s comments indicated the Fed would most likely announce a reduction or “tapering” of those purchases sometime in the final three months of this year.
Still some uncertainty
But he was careful to add that uncertainty remained in the economy. As an example, he noted that July showed encouraging employment numbers, but also the spread of the more virulent delta variant of the coronavirus that causes COVID-19, which threatens to prolong the pandemic.
Powell said the Fed would be “carefully assessing incoming data and the evolving risks.”
But he said while the delta variant presented a short-term risk, prospects look good for continued progress toward maximum employment. He noted that vaccination rates are increasing, schools are reopening and enhanced unemployment benefits are ending, all things that will motivate people to seek jobs.
Powell also continued to defend his position that a recent spike in inflation is only temporary, saying price increases should ease as the economy continues to normalize and supply chains reopen, ending shortages of consumer goods.
Some economists and members of Congress have pressured the Federal Reserve to raise interest rates to counter inflation, but Powell said he was reluctant to overreact to something that he believes is a short-term problem. He said a poorly timed move could drive inflation below desired rates.
Some information for this report came from The Associated Press and Reuters.