‘The time will come’ but it’s now now, Fed chairman says
The Federal Reserve isn’t contemplating pulling back on its bond-buying program even though there is widespread optimism about the medium-term economic outlook given promising news on COVID-19 vaccines, Fed chief Jerome Powell said Wednesday.
During a House Financial Services committee hearing, Rep. Bryan Steil, a Republican of Wisconsin, asked Powell about the balance sheet policy in light of the vaccine development.
“Can you comment on the indicators that you are watching closely as you consider taking steps to begin to restore the Fed’s balance sheet to its pre-pandemic levels?” Steil asked.
The Fed’s balance sheet is $7.2 trillion, more than $3 trillion bigger than at the beginning of the year. The central bank has been buying $120 billion per month of Treasurys and asset-backed mortgages since June.
In response, Powell said the Fed is “going to keep our rates low and keep our tools working until we feel like we’re very clearly passed the danger that is presented to the economy from the pandemic.”
“So we’re not considering pulling back any of our support for the economy and we’re not going to, until we feel very confident that it is no longer necessary,” he said.
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At their meeting last month, Fed officials discussed giving guidance on the economic conditions that would be needed to be reached before starting to taper the bond-buying program, but no decisions were reached.
The Fed chairman said the “time will come” to start thinking about balance sheet policy but “it is well into the future.”
When the time comes, the Fed would move slowly and carefully, he said.
Earlier, Powell said the economic crisis caused by the pandemic is not over.
“How long will it take, before we know” it is over, asked Rep. Katie Porter, Democrat of California.
“I think we will know a lot in the next four to six months about vaccines. But the real issue though is what are going to be the effects of people whose jobs may have changed or gone away. The post-pandemic economy is going to be different. We’re going to learn a lot about that in the second half of next year,” Powell said.
“Those people are going to need help, some of them,” he added.