Federal Reserve Chair Jerome Powell said the central bank could begin scaling back asset purchases as soon as November and complete the process by mid-2022, after officials revealed a growing inclination to raise interest rates next year.
Powell, explaining the U.S. central bank’s first steps toward withdrawing emergency pandemic support for the economy, told reporters Wednesday that tapering “could come as soon as the next meeting.”
That refers to the policy gathering on Nov. 2-3, though he left the door open to waiting longer if needed and stressed that tapering was not meant to start a countdown to liftoff from zero interest rates.
“The timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate liftoff,” he said following the completion of the two-day gathering of the Federal Open Market Committee. He said he didn’t expect the Fed to begin rate increases until after completing the taper process.
His performance was being parsed both by investors and the White House: The central bank chief’s term expires in February and President Joe Biden is expected to decide this fall whether or not to renominate him to another four years in his post.
In addition to signaling a scale back in upcoming bond buying, officials also published updated quarterly projections which showed officials are now evenly split on whether or not it will be appropriate to begin raising the federal funds rate as soon as next year, according to the median estimate of FOMC participants. In June, the median projection indicated no rate increases until 2023.
“We’re seeing a Fed that is getting more hawkish,” Diane Swonk, chief economist at Grant Thornton LLP, said in an interview on Bloomberg Television after the statement was published.
U.S. stocks pared gains, while yields on 10-year Treasuries pushed higher.
The FOMC decided to maintain the target range for its benchmark policy rate at zero to 0.25%, and continue purchases of Treasuries and mortgage-backed securities at a pace of $120 billion per month. The vote was unanimous.