BREAKING: The Federal Reserve will start dialing back its ultra-low-interest rate policies this year as long as hiring continues to improve, Chair Jerome Powell said, signaling the beginning of the end of the Fed's response to the pandemic recession.
The Fed’s move could lead, over time, to somewhat higher borrowing costs for mortgages, credit cards and business loans. The Fed has been buying $120 billion a month in mortgage and Treasury bonds to try to hold down longer-term loan rates to spur borrowing and spending. Powell’s comments indicate the Fed will likely announce a reduction — or “tapering” — of those purchases sometime in the final three months of this year.
At the same time, the Fed chair said the central bank is monitoring the economic impact of the highly contagious delta variant, which has caused a sharp spike in COVID-19 cases in the United States, especially in the South and West. A sharp jump in inflation has put the Fed’s ultra-low-interest rate policies under growing scrutiny, both in Congress and among households that are being squeezed by surging prices. Inflation, according to the Fed’s preferred gauge, rose 3.6% in July compared with a year earlier, the biggest increase in three decades. The month-to-month increase slowed from 0.5% to 0.3%.
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