Stock markets jumped on Friday after Federal Reserve Chief Jerome Powell took a cautious stance on potential withdrawal of the central bank’s huge economic stimulus measures later this year.
Wall Street rebounded from losses while European stock markets rose after a quiet day as Powell delivered his much-anticipated speech at the virtual Jackson Hole central banking symposium.
Powell’s address to the annual symposium was closely watched for an idea about plans to reduce the bond buying that has helped support the pandemic recovery.
Analysts say the timing of the taper is crucial as it could also give an indication of when to expect interest rates to go up.
Powell said that despite the impact of the Delta variant of Covid-19, the economy has continued to recover and show strong job growth. He repeated the Fed’s stance that “it could be appropriate to start reducing the pace of asset purchases this year.”
But he stressed that there was no hurry to raise interest rates, arguing that current inflation pressures will be temporary.
His remarks came after some other Fed members had argued that the bank could taper its asset-buying scheme this year.
“We finally heard from the Fed chairman and the markets loved it, even though he said what many had expected, that tapering bond purchases could begin before the end of the year,” said Fawad Razaqzada, market analyst at ThinkMarkets.
His comments were “interpreted by the market as the Fed Chair offering no fresh news and people who had betted on him providing some clear tapering timeline were left disappointed,” Razaqzada said.
Published in The Express Tribune, August 28th, 2021.
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