Fed chief signals supports for the economy could begin to be pulled back this year
Source: Washington Post
Federal Reserve Chair Jerome H. Powell offered his clearest signal yet that the Fed could soon start scaling back its support for the markets if economic recovery remains strongly on track, despite ongoing uncertainty from the delta variant of the coronavirus. Powell is expected to describe an economy brought to its depths by the pandemic, which disproportionately hurt people of color and workers in service industries, according to remarks to be given virtually Friday morning.
But Powells overarching message is that the recovery is on the path to a strong labor market, overall wage gains and pandemic-era price increases that are expected to simmer down. In March 2020, coronavirus cases began to spread throughout the United States, shutting down the economy and causing the financial markets to tank while millions of workers were laid off or furloughed in the shutdown that followed. The Federal Reserve swooped in to prop up the markets with several programs.
Fed leaders have consistently said they need to see substantial further progress on inflation and job growth before the central bank starts to pare back its $120 billion a month in asset purchases, which have been helping support the markets. For months, economists and Wall Street have been eager for any signs about when or how the Fed will begin to taper" its sprawling bond buying program, which helps stimulate the economy and makes borrowing easier by holding down long-term rates.
My view is that the 'substantial further progress test has been met for inflation, Powell said in the remarks. There has also been clear progress toward maximum employment. Powell added that at the Feds last policy meeting in July, he 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 of asset purchases this year.
Read more: https://www.washingtonpost.com/us-policy/2021/08/27/powell-federal-reserve-jackson-hole/
Full headline: Fed chief signals supports for the economy could begin to be pulled back this year, if recovery stays strongly on track
bucolic_frolic
(42,676 posts)They can't pull back on credit without crashing the markets and multiple asset bubbles.
They can't continue QE cheap money without destroying the currency.
They've explored going negative with yields. Your bank charges you to hold your money. It's already happening in Japan.
15 years of Bernanke-Powell has stolen years of growth from our collective future. Every business plan is profitable infinitely when interest rates are near zero. It's all in the spreadsheet.
Every Republican corporate wife has a side-business write-off. Restaurants, pilates, trinket capitalist gift shops line every Main Street, and every city neiighborhood business district.
I doubt there is a Volcker solution to this era. Neither the stock nor bond markets will tolerate muddling through with interest rate tweaking.
We are cooked. The proof is in the investment portfolios of the wealthiest investors and hedge fund managers, the profile interviews are all over financial media, YouTube. They are hunkered down in cash and in recession proof stocks that will continue to deliver business because they are essentials - retail, utilities, REITs, growth tech. In other words, as usual, big companies will be fine because that's where the corporate profits are. Your neighborhood chicken and hookah pub, not so much.
That's all blunt, but that's the way I see it. And my best sources think this won't shake out until spring 2022, because we haven't yet had a blow off top, one that sucks in the masses of ignoramuses.
Happy trading!
BumRushDaShow
(127,312 posts)is to rewrite the tax code to close those loopholes...
Of course good luck with that given the Senate makeup, but who knows? It can be done via reconciliation (if only... ).
AllaN01Bear
(17,383 posts)BumRushDaShow
(127,312 posts)IronLionZion
(45,259 posts)The nature of many sectors of the economy have changed permanently.
So many small vendors that depend on office workers to buy food or whatever would be out of business when everyone is working from home. They can't afford expensive rent in many downtowns.
Retail has been dying for a while and people got used to online shopping.
Computer chips are in everything so a chip shortage screws up everything. It might be time to make dumb products again without fancy chips. My dumb TV has been going strong for 11 years. I don't drive as much as a few years ago but I really don't want to buy a car now that it's so expensive.
I hope the Fed can make small increases to rates and decreases to bond buying without crashing everything. There will be dips if investors want to overreact but I'm hoping it would be short term and expected.
It takes a while for global supply chains to adapt to consumer demand.
pbmus
(12,418 posts)Reality Is Not What It Seems