Federal Reserve Chair Jerome Powell said officials can be patient on raising interest rates — after announcing a start to reducing their bond purchases — but won’t flinch from action if warranted by inflation
“We think we can be patient. If a response is called for, we will not hesitate,” he told a news conference Wednesday after the Federal Open Market Committee said it would scale back by $15 billion a month starting in November
Tapering “does not imply any direct signal regarding our interest rate policy,” Powell said, who noted that the pace put them on track to wrap the process up by mid-2022 but could speed up or slow down depending on the economic outlook
The Fed will reduce Treasury purchases by $10 billion and mortgage-backed securities by $5 billion, marking the beginning of the end of the program aimed at shielding the economy from Covid-19
The FOMC decided to maintain the target range for its benchmark policy rate at zero to 0.25%
“We don’t think it is a good time to raise interest rates because we want to see the labor market heal further,” Powell said
The Fed has been buying $80 billion of Treasuries and $40 billion of MBS every month to help stimulate economic activity
The pace of the taper clears the way for a possible interest-rate increase in the second half of 2022, with nine of 18 officials forecasting a move next year in their September outlook. Wednesday’s statement reiterated that rates will be held near zero until the economy achieves maximum employment
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