Powell: Fed could withdraw economic support faster as prices rise

“The economy is very strong and inflationary pressures are high, so it is appropriate, in my opinion, to consider concluding the reduction in our asset purchases, which we actually announced at the November meeting. , maybe a few months earlier, “Powell said at a Senate Banking Committee hearing.

He said that, so far, the Fed had made no adjustments to its plans based on an emerging variant of the coronavirus known as Omicron, but that he hoped to have more information beforehand. the next central bank policy meeting in December.

He said Fed officials will review data on transmissibility, whether existing vaccines continue to be effective against the new strain and the severity of the disease it causes.

“What the experts are telling me is that we will know a lot about these answers within a month or so,” he said. “We will know something, however, in a week or 10 days, and then and only then can we assess what the impact on the economy would be.”

While Fed officials continue to express optimism that inflation will start to cool down later next year, this forecast is highly dependent on what is happening with the coronavirus, as the increased risk of disease keeps some workers on the sidelines and also contributes to supply chain disruptions.

Still, job growth has been healthy in recent months, a trend which, if continued, could help alleviate the downside if the central bank decides to start raising interest rates next year. .

Powell also said the Fed will aim to be clearer in its analysis of the risks posed by inflation, suggesting it would stop using the word “transient” to describe the nature of recent price increases.

“For many it gives a feeling of short-lived,” he said. “We tend to use it to mean that it won’t leave a permanent mark in the form of higher inflation. I think it’s time to take that word out and make it clearer what we mean.

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