Fed's Powell signals tapering could begin soon, but delta variant's threat to US economy still a risk

Fed Chair Powell speaks on economy at the annual Jackson Hole Symposium

Federal Reserve Chairman Jerome Powell is expected to deliver a speech at the annual Jackson Hole Symposium

Federal Reserve Chairman Jerome Powell signaled Friday the U.S. central bank expects to begin unwinding some of its ultra-easy monetary policies by the end of the year as the U.S. economy continues to rebound from the COVID-19 pandemic.  

In his much-anticipated speech at the central bank's virtual Jackson Hole, Powell said the economy has reached a point where the Fed can start reducing its $120 billion monthly purchases of Treasury and mortgage-backed securities – but said that any interest rate liftoff is still a ways away.

"At the FOMC's recent July meeting, I was of the view, as were most participants, that if the economy evolved broadly as anticipated, it could be appropriate to start reducing the pace of asset purchases this year," Powell said. "The intervening month has brought more progress in the form of a strong employment report for July, but also the further spread of the Delta variant. We will be carefully assessing incoming data and the evolving risk." 

For months, the U.S. central bank has been grappling with how to manage the exit from the ultra-easy monetary policies put in place in March 2020 to keep the economy afloat without triggering a market sell-off. 

The issue has been complicated by a sharp divergence of opinions among members of the Federal Open Market Committee about when to start pulling back support. Minutes from the Fed's July meeting show that while "most" officials are prepared to reduce the asset purchases this year, others think it best to wait until 2022. 

This is a developing story. Please check back for updates. 

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