Powell: Guidance around Fed Tapering Could Come at Next Meeting

Substantial further progress toward maximum employment “all but met,” Fed chair says.

article-image

Jerome Powell, chairman, Federal Reserve; blockworks exclusive art by Axel Rangel

share

key takeaways

  • If recovery remains on track, a gradual tapering process that concludes around the middle of next year is likely to be appropriate, Powell says
  • The Fed still evaluating whether to issue a CBDC amid extensive private innovation, which the Fed chair noted is taking place outside the regulatory perimeter

While the Federal Open Market Committee (FOMC) kept interest rates near zero and maintained its asset purchases, Chair Jerome Powell said considerations around tapering “could come as soon as the next meeting.”

The Committee indicated last December that it would continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month until substantial further progress has been made toward its maximum employment and price stability goals.

“For inflation, we appear to have achieved more than substantial further progress, so that part of the test is achieved in my view and in the view of many others,” Powell said Wednesday during a press conference following the FOMC meeting. “The question is really on the maximum employment test.”

Job gains averaged 750,000 per month over the past three months but slowed in August in sectors such as leisure and hospitality due to rising Covid cases

Powell admitted that the anticipated filling of job vacancies in September as children went back to school and unemployment benefits expiring has not happened “in force” due to the Delta variant.   

The FOMC generally views that so long as the recovery remains on track, a gradual tapering process that concludes around the middle of next year is likely to be appropriate, Powell added. 

“The timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal in the timing of interest rate liftoff, for which we have articulated a different and substantially more stringent test,” the Fed chair noted.

The committee continues to expect to maintain a target range for the federal funds rate between 0% and 0.25% until there is maximum employment and inflation has risen to 2% and exceeds 2% for a period of time. Half of FOMC participants forecast these will be fulfilled by the end of next year. 

Ethics review, CBDC progress

Powell also addressed media reports of Fed officials who traded stocks and other investments while setting monetary policy.

Financial disclosure forms show that Federal Reserve Bank of Dallas President Robert Kaplan and Federal Reserve Bank of Boston leader Eric Rosengren actively traded in markets last year, the Wall Street Journal recently reported.

He said the Fed has begun a review of the ethics rules around permissible financial holdings and activity by Fed officials, noting that such officials should in general not be owning the same assets that the Federal Reserve is buying. 

“No one at the FOMC is happy to be in this situation, to be having these questions raised. It’s something we take very, very seriously,” Powell said. “This is an important moment for the Fed, and I’m determined that we will rise to the moment and handle it in ways that will stand up over time.”

The Fed chair was also asked about progress on developing a central bank digital currency (CBDC). Powell noted that the Fed will soon publish a discussion paper on the subject.

“With the creation of myriad private currencies and currency-like products, we’re working proactively to evaluate whether to issue a CBDC and if so, in what form,” he said. “…I think it’s important that we get to a place where we can make an informed decision about this and do so expeditiously. I don’t think we’re behind. I think it’s more important to do this right than to do it fast.”


Are you a UK or EU reader that can’t get enough investor-focused content on digital assets?Join us in London on November 15th and 16th for the Digital Asset Summit (DAS) London. Use code ARTICLE for £75 off your ticket. Buy it now.


Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research report - cover graphics (1).jpg

Research

In this report, we dive into crypto private market data to gather insights on where the future of the industry is headed. Despite a notable downturn in private raises, capital continues to infuse promising projects that aim to transform payments, banking, consumer experiences, community, and more, with 2023 being the fourth-largest year for crypto venture capital.

article-image

BUZZ holds shares of Coinbase, Robinhood and MicroStrategy

article-image

Opinion: Even though I didn’t pay for my “Diamond Hands” burger with BTC, don’t let that fool you into thinking that crypto’s development is futile

article-image

The results mark “a major positive inflection point,” one analyst says, as the exchange carries net income momentum into a crypto rally

article-image

While the slate of 10 US spot bitcoin funds have tallied $4.6 billion of net inflows thus far, half of the field is lagging the leaders

article-image

Trading volumes totalled $154 billion in Q4, including $125 billion in institutional volume

article-image

DeFi on Bitcoin is all the rage right now and Stacks is positioned to benefit