The Fed chief spoke to a committee of the US House of Representatives on Wednesday.
(Photo: Reuters)
Washington According to the Federal Reserve (Fed), the US economy has recently grown at a moderate to moderate pace. The outlook for the near future remains positive overall in most Fed districts, announced the Fed in its “Beige Book” published on Wednesday.
In the economic report, which is based on economic contacts from the regions, the Fed also pointed out that delivery bottlenecks and a shortage of workers were causing price pressure. Prices have risen at a moderate to robust pace, with inflation occurring throughout the economy.
Many of the twelve Fed districts have also reported difficulties with companies in filling positions, which has led to salary increases.
Faster reduction of bond purchases possible
According to Federal Reserve Chairman Jerome Powell, the economy is very strong and inflationary pressures are high at the same time. The central bank is therefore looking to reduce its bond purchases more quickly on the way to a rate hike. The unemployment rate has recently fallen to 4.6 percent. A further decrease to 4.5 percent is expected for November.
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Jerome Powell does not expect any upheaval in the financial markets despite the recent move away from the crisis mode. The gradual reduction in bond purchases – so-called tapering – will in his view not cause such disruptions, he said on Wednesday before a committee of the House of Representatives.
According to Powell, the current high inflation could last longer than originally expected. However, it is difficult to predict the continuation and the effects of the supply bottlenecks.
He expects inflation to decline significantly in the second half of next year. But the forecasts are uncertain. Therefore, the Fed cannot assume that it will turn out that way.
Consumer prices rose 6.2 percent in October – the strongest increase since November 1990. Against this backdrop, the Federal Reserve has been cutting back its securities purchases by $ 15 billion a month since mid-November. The total purchase volume of recently 120 billion dollars per month could thus be melted down by the middle of next year.
This is a prerequisite for an interest rate hike. If the rate of reduction were to be increased, the tapering could be completed earlier and the interest rate turnaround initiated sooner. The Fed is currently keeping the key rate in a range of zero to 0.25 percent.
More: US Federal Reserve discusses faster way to raise interest rates