Federal Reserve Likely To Start Tapering

Federal Reserve Likely To Start Tapering

Friday 27th August 2021 – 16:00 (BST)

The Chairman of the Federal Reserve, Jay Powell, has given his strongest hints yet that the US central bank is likely to scale back its historic pandemic-era stimulus by the end of 2021.

Speaking at the virtual Jackson Hole gathering of central bankers on Friday, Powell stated that the world’s largest economy was now on a path that would allow a reduction of the monthly $120bn securities purchase programme currently being maintained.

The central bank had previously pledged to continue the programme until it sees “substantial further progress” on its core goals of 2% inflation and maximum employment across the USA.

Powell commented “My view is that the ‘substantial further progress’ test has been met for inflation,” followed by “There has also been clear progress toward maximum employment.”

He was keen to add that this didn’t necessarily correlate to an imminent hike in interest rates and there was still “much ground to cover” before the economy hits full employment.

Risk appetite was immediately stoked following the comments, with US stock markets pushing all-time highs and the US dollar falling around 0.5% against a number of G7 currencies.