‘Not the time’ to discuss any change to bond purchases, says Fed’s Powell

 With the US economy still far from its inflation and employment goals it is too early for the Federal Reserve to discuss changing its monthly bond purchases, Fed Chair Jerome Powell said

(Reuters) – With the U.S. economy still far from its inflation and employment goals it is too early for the Federal Reserve to discuss changing its monthly bond purchases, Fed Chair Jerome Powell said Thursday. “Now is not the time to be talking about exit,” from the $120 billion in government securities the Fed is buying each month, Powell said in a web symposium with Princeton University. “A lesson of the Global Financial Crisis is be careful not to exit too early, and by the way try not to talk about exit all the time…because the markets are listening.””The economy is far from our goals…and we are strongly committed…to using our monetary policy tools until the job is well and truly done,” Powell said, pushing back against recent suggestions from some of his colleagues that the Fed might consider trimming its bond purchases even later this year if vaccines supercharge an economic rebound.

Those suggestions may have contributed, if slightly, to a recent rise in yields on U.S. Treasury securities. Powell’s comments came a day after other members of the Fed’s Washington-based Board of Governors also made it clear the time for any “taper” is well off. Yields on the benchmark 10-year Treasury note briefly edged lower on Powell’s remarks. Ill-timed Fed talk of trimming bond purchases after the 2007 to 2009 financial crisis at one point triggered rapid changes in global bond yields, a “tantrum” Fed officials don’t want to repeat.

In this case, when the economy improves substantially, “and we can see that clearly, we will let the world know, communicating very clearly to the public, and do so well in advance of active consideration,” of any policy changes, Powell said. He said an interest rate increase as well would come “no time soon” given the depth of the economic problems related to the still-raging health crisis…Read More