Fed dissent and bond volatility are in Powell s taper future
Craig Torres and Liz Capo McCormick, Bloomberg News Jerome Powell Photographer: Andrew Harrer/Bloomberg , Bloomberg
Jerome Powell doesnât want to talk about scaling back massive Federal Reserve asset purchases at least not yet but itâs only a question of time before the discussion resumes and that might not be a bad thing.
The Fed chair told reporters on Jan. 27 that âthe whole focus on exit is prematureâ a clear call to his colleagues to focus on whatâs in front of them rather than the forecast.
Fed policy makers, like lawmakers, split on need for more fiscal aid
As the White House and Congressional Democrats press for a $1.9 trillion pandemic relief package that many Republicans say is more than what the country needs or can afford, Federal Reserve policymakers are also split on the issue.
“We are still in the teeth of this pandemic – and we are not out of the woods yet,” Dallas Fed President Robert Kaplan told the Chicago Council on Global Affairs in an online event Monday.
He forecast, as vaccines get rolled out and more businesses can reopen, the U.S. economy will likely grow about 5% this year, enough to push unemployment down to 4.5%, from 6.7% in December.
Fed policy makers, like lawmakers, split on need for more fiscal aid By Ann Saphir
FILE PHOTO: The Federal Reserve building is pictured in Washington, DC
(Reuters) – As the White House and Congressional Democrats press for a $1.9 trillion pandemic relief package that many Republicans say is more than what the country needs or can afford, Federal Reserve policymakers are also split on the issue.
“We are still in the teeth of this pandemic – and we are not out of the woods yet,” Dallas Fed President Robert Kaplan told the Chicago Council on Global Affairs in an online event Monday.
He forecast, as vaccines get rolled out and more businesses can reopen, the U.S. economy will likely grow about 5% this year, enough to push unemployment down to 4.5%, from 6.7% in December.
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13 Jan, 2021 Author Brian ScheidPolo Rocha
The short-term outlook for the U.S. economy may be dark, but bond investors see a bright future.
The U.S. Treasury yield curve has steepened to levels not seen since 2016, signaling that investors expect economic expansion and higher inflation in the coming years as coronavirus vaccines are distributed and incoming President Joe Biden and a Democrat-controlled Congress are expected to pass another substantial stimulus package.
The steepening curve is likely a sign of economic recovery, said Michael Crook, deputy chief investment officer at Mill Creek Capital. It s very possible we re on track for a period of above-trend economic growth unlike anything we ve seen in the last two decades, but it won t happen all at once.
Getty Images / Tasos Katopodis
Federal Reserve Chairman Jerome Powell reiterated Thursday that the central bank is far from tapering its asset purchases or raising interest rates. Now is not the time to be talking about an exit from easy monetary policy, the central bank chief said in a virtual discussion.
The comments come after various Fed officials suggested that inflation could pick up faster than expected and, in turn, prompt an early rate hike.
Powell rebuffed fears of an unexpected policy shift, noting the central bank will notify the public well in advance if it is considering changes to its policy stance.