Federal Reserve Chairman Jerome Powell indicated Tuesday that the central bank could step up the removal of its efforts to boost the economy.
In an appearance before a Senate committee, the Fed chief said he thinks reducing the pace of monthly bond buys can move quicker than the $15 billion a month schedule announced earlier this month.
Powell said he expects the issue to be discussed at the December meeting.
“At this point, the economy is very strong and inflationary pressures are higher, and it is therefore appropriate in my view to consider wrapping up the taper of our asset purchases … perhaps a few months sooner,” he said. “I expect that we will discuss that at our upcoming meeting.”
Following its November meeting, the Federal Open Market Committee, which sets monetary policy including interest rates and the Fed’s efforts to boost activity through bond purchases, said the pace would be cut by $15 billion a month — $10 billion in Treasurys and $5 billion in mortgage-backed securities.
However, the post-meeting statement indicated that would be the case for November and December but noted it “is prepared to adjust the pace of purchases if warranted by changes in the economic outlook.”
The Fed had been buying at least $120 billion a month, a figure that included $80 billion in Treasurys and $40 billion in MBS.
Since the November FOMC meeting, additional data points have show inflation running at its highest pace in more than 30 years.
During Tuesday’s hearing before the Senate Banking, Housing and Urban Affairs Committee, Powell faced multiple questions about inflation and what policy adjustments that Fed was considering to deal with the issue.
Fed officials long have maintained that inflation is “transitory,” a word Powell defines as not leaving a lasting mark on the economy. The word appeared in the post-meeting statement, though the chairman said it’s probably not useful anymore.
“The word transitory has different meanings for different people. To many it carries a sense of short-lived. We tend to use it to mean that it won’t leave a permanent mark in the form of higher inflation,” Powell said. “I think it’s probably a good time to retire that word and try to explain more clearly what we mean.”
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