Powell: Tapering Might Begin This Year, Rate Hike Far Off

Powell said that the central bank may begin tapering its $120 billion/month asset purchases this year, although a rate hike will not be coming soon.

article-image

Jerome Powell, chair, Federal Reserve, Blockworks Exclusive Art by Axel Rangel

share

key takeaways

  • Powell stays on script that inflation will be transitory
  • Rate hikes are unlikely to come in the near future

Federal Reserve Chairman Jerome Powell said that the central bank may start to scale back its asset purchases this year during his virtual Jackson Hole policy forum address Friday. He also stressed that the recent inflation surge will fade in time. 

During the July meeting, “I was of the view, as were most participants, that if the economy evolved broadly as anticipated, it could be appropriate to start reducing the pace,” Powell said Friday, referring to the Fed’s $120 billion monthly asset purchase pace. 

Powell noted that the economy has progressed since July in terms of employment numbers, but the rise of the delta variant may pose additional challenges. 

“The intervening month has brought more progress in the form of a strong employment report for July, but also the further spread of the delta variant,” Powell said. “We will be carefully assessing incoming data and the evolving risks.”

Stocks gained on the news. The energy, materials and communication sectors pushed the S&P 500 higher Friday after closing lower on Thursday. 

“The market is taking Powell as slightly dovish, and then it seemed a bit confusing because he did say that the Fed is going to taper QE starting this year, but we always expected that,” said Tom Essaye, founder of Sevens Report Research. “That’s what everybody’s expected and priced in, instead what Powell did was spend most of his speech pushing back on the idea that inflation is a problem.”

Inflation chart

Powell continued to insist that today’s 4% inflation will not be lasting, also claiming that today’s wage increases are unlikely to impact inflation significantly. 

“We will continue to monitor this carefully, policymakers and analysts generally believe that as long as longer term inflation expectations remain anchored, policy can and should look through temporary swings in inflation,” Powell said. 

There will not be any interest rate changes, Powell said, until the economy reaches “conditions consistent with maximum employment,” and inflation has reached 2%. 

June’s quarterly projections revealed that seven of 18 Federal Open Markets Committee participants believed raising rates next year would be appropriate. Thirteen expected rate increases would be appropriate by 2023. 

“I agree that 4% Inflation is transitory, I think that some of what we are seeing is not to go away,” said Essaye. “I think that inflation is going to run between 2% and 3% now pretty consistently, which isn’t necessarily a problem, but it’s also something we’re not used to.”  

Powell’s address comes as President Biden weighs whether or not to nominate the head of the central bank for a second term.

Want more investor-focused content on digital assets? Join us September 13th and 14th for the Digital Asset Summit (DAS) in NYC. Use code ARTICLE for $75 off your ticket. Buy it now.

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

Blockworks and Cracked Labs are teaming up for the third installment of the Permissionless Hackathon, happening June 22–23, 2025 in Brooklyn, NY. This is a 36-hour IRL builder sprint where developers, designers, and creatives ship real projects solving real problems across […]

recent research

Research Report Templates (19).png

Research

Suilend has grown into the top money market and liquid staking provider on Sui. STEAMM, Suilend’s Superfluid AMM, presents a compelling avenue for growing market share within Sui’s DEX landscape and revenue generation for the protocol. Suilend’s multi-product suite position it well for owning market share across key verticals. While current metrics across the Sui ecosystem are likely inflated due to Sui Foundation incentive programs, SEND trades at amongst the lowest multiples in the lend/borrow sector, suggesting that a bull case for continued growth in the ecosystem may be mispriced.

article-image

Silk Road founder Ulbricht made a triumphant return to the Bitcoin Conference, 10 years on from sentencing

article-image

A Blockworks Research report looked at who could take up some of the marketshare in the launchpad space

article-image

Business-to-business stablecoin payments are on the rise, per a report from Artemis, Dragonfly and Castle Island

article-image

Crypto continues to do its thing: incentivizing behavior

article-image

Kraken will soon offer Backed ‘xStocks’ as Solana tokens

article-image

In a unanimous decision, the US Court of International Trade has ruled that Trump’s IEEPA tariffs are unlawful