Tapering before the end of the year. The beginning of the Fed’s monetary stimulus reduction could occur by 2021. But a hasty intervention could cause damage, due to health uncertainty, the weaknesses of the American economy and the spread of the Delta variant. This is what emerged from the speech of the number one of the Federal Reserve, Jerome Powell, at the Jackson Hole Bankers’ Late Summer Symposium.
But a date for the Fed buying easing, today equal to 120 billion of dollars per month, still not there. Tapering, according to the Fed’s number one, is not “a direct signal of a near hike in interest rates”. “There timing and pace the imminent reduction in asset purchases is not intended to provide a direct signal as to the timing of the interest rate hike, for which we have articulated a different and substantially more rigorous test, “Powell explained.
On the chapter inflation, the number one of the Federal Reserve, has instead reassured: the increase in prices “causes concern”, but is “temporary”. He is confident that the target can return to 2%. “We have said that we will continue to hold the target range for the federal funds rate at the current level until the economy reaches conditions consistent with maximum employment and inflation reaches 2% and is well on its way to. moderately exceed 2% for some time, “said the head of the Fed.
“If a central bank hardens politics in response to factors that prove temporary, Powell noted, the major effects of the policy are likely to come after the need has passed. The inappropriate political move, Powell pointed out, unnecessarily slows hiring and other economic activities and pushes inflation below desired. “
“Today, with a substantial loosening in the labor market and the pandemic continuing, such a mistake could be particularly damaging. We know that long periods of unemployment can mean permanent damage to workers and the productive capacity of the economy.” However, the number one of the Fed pointed out, “history also teaches that central banks cannot assume that inflation due to transitory factors will decrease”.
Also on the facing employment, “Labor market conditions are improving but turbulent, and the pandemic continues to threaten not only health and life, but economic activity as well. Many other advanced economies are experiencing similarly unusual conditions.” In any case, “we have a long way to go to reach maximum employment and time will tell if we have reached 2% inflation on a sustainable basis. Meanwhile, on the US market the S&P 500 scores 4,505 points and the Nasdaq Composite is climbing to 127 points The dollar is down, with the euro back to 1.18, Milan rising to + 0.3%.