August 30, 2021 — Fed’s Annual Symposium: No Policy Change Timeline Given


On Friday, at the Federal Reserve’s annual symposium, Fed Chair Jerome Powell was non-committal on the timing of monetary policy changes.  His comments were dovish, saying the Fed is inclined to take a wait and see approach before adjusting policy and tapering asset purchases.  “Today with slack remaining in the labor market and the pandemic continuing, such a mistake could be harmful.”  Powell added, “if the economy evolved broadly as anticipated, it could be appropriate to start reducing the pace of asset purchases this year.”

During his address, Powell acknowledged the risk of the delta variant, which may create another downturn.  He still believes high inflation is transitory and will pass as the economy matures. The next jobs report is critical, and if job creation remains strong, it is possible the Fed could release a timeline for changes as early as their next meeting on September 21-22.  However, if a tapering of asset purchases is defined, it will have no effect on the subsequent decision to raise rates.  The Fed has set a “different and substantially more stringent test” for raising rates.  It can take a year for monetary policy decisions to work through the economy, and the Fed believes tightening too soon may risk less hiring and sustained, low inflation.