Fed on track to start reducing asset purchases, chair says
Risks point to longer, persistent bottlenecks, thus to higher inflation, Powell says
The US Federal Reserve is on track to begin reducing its asset purchases, the process known as tapering, Fed Chair Jerome Powell said Friday.
"We need to watch carefully to see whether the economy is evolving with our expectations," Powell said at BIS-SARB Centenary Conference, hosted by the Bank for International Settlements (BIS) and the South African Reserve Bank (SARB).
"Risks are clearly point to longer and more persistent bottlenecks, and thus to higher inflation," he added, noting that the high inflation levels are likely to last longer than previously expected well into 2022.
Powell argued that the start of tapering is not likely to disrupt the recovery in the labor market, and markets are prepared for it. He also noted that it would be too early for the central bank to raise interest rates at the moment.
He added that the labor market might continue its improvement until it reaches maximum employment, which is likely to come next year.
The US economy, however, could only add 194,000 jobs in September, while there are still 7.7 million unemployed individuals in the world's largest economy.
The central bank at the conclusion of its two-day meeting on Sept. 22 signaled that it could start tapering as early as November, while Powell said in a press conference afterward that tapering may conclude by the middle of 2022.
The Fed's next two-day meeting will be held on Nov. 2-3.