However, the Fed is still concerned with the “millions” of people still out of work. With this “part of recovery” far from complete and delta variant’s impact on the economy unclear yet, it’s to be seen when will the tapering begin.
The US Federal Reserve is in the process of putting away its emergency tools that were supplied in the form of monetary stimulus at the beginning of last year to mitigate the effect of the coronavirus pandemic and support the American economy. Chairman Jerome Powell said on Tuesday,
“As the emergency had receded we are required to put these tools away. We are in the process of putting away those tools which are reserved for actual emergencies.”
Powell’s comments that came at a virtual meeting are considered as the first hint as to when the central bank would start paring its $120 billion monthly asset purchase program. As for the interest rates that are virtually kept at zero, the Fed signaled in June that it could make two rate hikes at 0.25% each by 2023.
During the meeting, Powell said the pandemic has changed our economy, but it’s to be seen if the new delta strain will also have a “significant impact on the economy.”
However, the Fed head still pointed to the weak labor market with “millions” of people still out of work. With this “part of recovery” far from complete, Powell said,
“The pandemic is still casting a shadow on economic activity.”
During the virtual conference, the SEC Chair also touched upon cryptocurrencies, which he said, are “becoming more and more important.”
Unlike Powell, Minneapolis Fed President Neel Kashkari had harsh words for crypto. Speaking at the Pacific Northwest Economic Regional Annual Summit in Big Sky on Tuesday, the central banker said, “Cryptocurrency is 95% fraud, hype, noise, and confusion.”
But when it comes to monetary policy plans, Kashkari echoed Powell’s sentiment, saying that he still sees “a lot of slack” in the labor market, suggesting he might need a couple of more strong jobs reports before supporting a push to scale back bond purchase.
On the topic of a digital dollar meanwhile, Powell said,
“We provide physical currency. We don’t provide digital currency for the public. It’s a challenging question if we should.”
August 15 marked the 50th anniversary of fiat currency, not based on the gold standard but depending on the faith in the central bank.