ARLINGTON, Va.–Perhaps the most surprising thing to come out of last week’s Federal Reserve meeting was the lack of surprise.
As expected, during the virtual event held as part of the Fed’s annual symposium in Jackson Hole, Wyo., Fed Chairman Jerome Powell said just what everyone expected him to say, that the U.S. economy has now arrived at a point where it doesn’t need as much support from the central bank and it will begin “tapering” the amount of bonds it purchases each month before the end of the year, provided the economic recovery continues.
“I think that it went largely as expected,” agreed NAFCU’s chief economist, Curt Long. “We came in thinking he was probably going to look to taper this year, would also try to massage the message in a way that did not roil markets or (imply) a rate hike was in the offing. I think he seemed to do that.”
Long acknowledged Powell and the Fed have continued to be challenged by the balancing act necessary between reducing the $120 billion in bonds it purchases every month while not pushing rates up at the same time. And he believes the Fed has largely been successful in the signals it’s sent.
Smarter Markets
“The markets have gotten smarter,” said Long. “They recognize these assets purchases are intended to signal” the Fed will support the economy, and that no action is coming on rates, especially in the short term.
As expected, as he has addressed the issue in the past, Powell repeated the Fed’s position that the current spike in inflation is transitory.