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WASHINGTON – The president of the Federal Reserve (Fed), Jerome Powell, indicated this Friday that, if the economic recovery continues solid, it could be “appropriate to begin the reduction” of the monetary stimulus at the end of the year.
“If the economy evolves as anticipated, it would be appropriate to start reducing the pace of asset purchases this year,” Powell said in his speech at the Jackson Hole, Wyoming, central bankers conference.
Powell insisted that the recent price spike is “transitory” in nature and highlighted “clear progress” towards full employment.
Despite the optimistic outlook for the US economy, whose latest forecasts point to 7% growth for 2021, the Fed chairman warned that “the timing and pace of the next reduction in bond purchases does not seek to lead to a direct signal about the rise in interest rates ”.
Anticipate untimely rise in interest
To do this, Powell stressed, “there is still a lot of ground to cover” and warned of the risks of an “untimely” rate hike in response to specific economic data.
The Fed keeps interest rates at the range between 0% and 0.25% since March 2020 and monthly bond purchases of $ 120 billion in response to the economic impact of the COVID-19 pandemic.
Annual inflation stood at 5.4% in July, levels not seen in more than a decade, but the Fed reiterates that this rebound is largely due to the reopening of economic activity and considers that it will gradually reduce to the annual target Of 2 %.
The unemployment rate continues its progressive decline and it closed last month at 5.4%, the lowest percentage since the arrival of the pandemic to the US in March 2020.
The next Fed meeting is scheduled for September 21-22.
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