“At this point, the economy is very strong, and inflationary pressures are high,” he said. “It is therefore appropriate in my view to consider wrapping up the taper of our asset purchases, which we actually announced at our November meeting, perhaps a few months sooner.”
His comments further rattled investors, who had already been fretting about Omicron’s potential impact. Stocks, which had been down roughly 0.5 percent for much of the morning, tumbled after Mr. Powell’s comments and the SP closed down 1.9 percent. Short-term bond yields, which are heavily influenced by expectations for Fed rate increases, spiked as investors began to expect what is sometimes referred to as a “hawkish,” or aggressive approach to interest rate policy.
“The tone of his remarks was notably hawkish, suggesting that the Fed’s primary focus is on the risk of more persistent excess inflation,” Krishna Guha, an economist at Evercore ISI, wrote in a research note reacting to the testimony.
Mr. Powell said he expected Fed officials to discuss slowing bond purchases faster “at our upcoming meeting,” which is scheduled for Dec. 14-15. He stressed that between now and then, policymakers will get a better sense of the new Omicron virus variant, a fresh labor market report and updated inflation numbers.
While he emphasized that much is unknown about Omicron, he said experts could get a better sense of it “in about a month,” and will know at least something about the risks “within a week or 10 days.”
Article source: https://www.nytimes.com/2021/11/30/business/powell-bond-buying-taper.html
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