Federal Reserve Expects US Rate Hike By 2023 But Not Decided On Asset Tapering - Powell

WASHINGTON (UrduPoint News / Sputnik - 17th June, 2021) The Federal Reserve expects to raise US interest rates by late 2023 but has yet to decide on when to reduce the $120 billion in bonds and assets it has been buying each month to support the economy through the coronavirus pandemic, Chairman Jerome Powell said.

The Federal Reserve's original target for raising rates was beyond 2023 but its Summary of Economic Projections released at the end of its June policy meeting on Wednesday suggested a hike of 0.6 percent in the next two years from current rates of between zero and 0.25 percent.

Powell attributed the change to rising price pressures, adding: "We are going to watch carefully (the) evolving inflation and ... we will conduct policy appropriately".

Powell also said the Federal Reserve will only reduce its monthly purchases of bonds and assets when it is appropriate to execute such tapering.

"Our intention for this process is that it will be orderly, methodical and transparent," Powell told a news conference. "We will do what we can to avoid a market reaction but ultimately when we achieve our macroeconomic goal, we will taper as appropriate. We will taper when we feel that the economy has achieved substantial further progress."

Powell said he expected inflation to fall from a projected 3.4 percent this year to 2.1 percent by 2022 and stabilize at 2.

2 percent by 2023 as supply disruptions in the economy caused by the coronavirus pandemic fade.

In addition, Powell said the Federal Reserve needed more data on various economic conditions before it could make a decision on tapering.

"At coming meetings, the committee will continue to assess the economy's progress toward our goals and will give advance notice before announcing any decision. The timing of course a lot will depend on the pace of that progress, and not on any Calendar," he said.

The Federal Reserve chairman pointed out that he anticipated strong jobs growth this summer, adding that the country as a whole could have a "very healthy" labor market over the next one to two years.

Powell said lingering COVID-19-related issues, such as supply chain bottlenecks that prevented factories from getting products out efficiently and hiring more workers, were among factors that had hampered jobs growth in recent months.

"Long-term labor supply will surpass expectations, there's no reason to believe that won't happen again," he said. "I'm not sure what the labor force participation rate will be. But there is every reason to think that we will be in a labor market with very attractive numbers with low unemployment, high participation, and rising wages across the spectrum. We think it's a flexible economy and it will clear."