The Fed will probably discuss a faster reduction in bond purchases at the next meeting, says Powell

November 30 (Reuters) – Federal Reserve Chairman Jerome Powell said on Tuesday that the US Federal Reserve is likely to discuss accelerating its “downsizing” of major bond purchases at its next board meeting, amid a strong economy and expectations of a rise in inflation will persist in the middle of next year.

“At this time, the economy is very strong and inflationary pressures are high, so it is appropriate, in my view, to consider ending the downsizing of our asset purchases, which we actually announced at the meeting in November, perhaps a few months earlier, and I expect that we will discuss it at our next meeting in a couple of weeks, “Powell said in testimony to the US Senate Banking Committee.

The Fed began reducing its support for the economy this month, and is currently on track to downgrade its $ 120 billion in monthly purchases of government bonds and mortgage-backed securities by June next year. The program was introduced in early 2020 to help the economy through the COVID-19 pandemic.

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A number of Fed officials had previously called for the central bank to increase the pace to complete it sometime in the spring to allow an earlier start in interest rate hikes if they were needed to curb inflation.

Powell’s remarks seem to suggest that he is ready to join these colleagues in advocating for a faster settlement of asset purchases, and was made as financial markets continued to be disrupted by the emergence of a new variant of the coronavirus that can Avoid vaccinations. This news prompted markets linked to Fed policy expectations to push back the assumed timeline for the start of interest rate hikes.

But Powell’s comments about a potentially faster slowdown and that inflation should no longer be considered a “transient” phenomenon reversed some of that momentum and led to higher bond yields.

The policy-making Federal Open Market Committee will hold its next two-day policy meeting on 14-15. December.

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Reporting by Lindsay Dunsmuir and Ann Saphir; Edited by Richard Pullin and Paul Simao

Our standards: Thomson Reuters Trust Principles.

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