The beginning of the tapering, the reduction of Fed monetary stimulus is “possible” by the end of the year. But too premature intervention could prove to be “very damaging”, given the climate of uncertainty fueled by weaknesses in the US economy and the proliferation of the Delta variant.
This was stated by the chairman of the Federal Reserve, Jerome Powell, in his video speech at the Jackson Hole (USA) bankers symposium. Powell, however, did not provide a precise roadmap for the easing of purchases by the Fed, amounting today to 120 billion dollars a month, and stressed that the so.called tapering “is not a direct signal of a near increase in interest rates” – On the inflation chapter, Powell admitted that the flare.up in prices “causes concern”, but is convinced that the increase is temporary and we can return to the 2% target.
US stocks reacted to Powell’s words with a blaze, pushing the S&P 500 to an intraday record of 4,505 points and the Nasdaq Composite up to 127 points. The dollar is down, with the euro returning to 1.18 against the greenback and now trading at 1.1801. The European stock exchanges cleared up after a somewhat stiff start, with Milan rising to + 0.3%.
Economy improves, but the Delta variant worries
In short, the line is that of a prudent opening. The US economy, the Fed number one pointed out, remains on the “right path” to recover from the pandemic thud, thanks to the combination of “high levels of employment and participation, widely shared wage benefits and inflation close to our goal of price stability ‘.
But at the same time, too many unknowns remain to be assessed before an abrupt halt to US central bank stimuli. Powell noted the progress of the labor market, “improved more than expected”, but reiterated that unemployment is still too high. Without forgetting the macro.unknown of Covid and its Delta variant, with immediate risks for a full.scale recovery. “The pandemic – said Powell – remains a threat to growth and the Delta variant creates short.term risks”.