WASHINGTON (NYTIMES) – The Federal Reserve kept interest rates unchanged on Wednesday (July 28) and said it would continue buying large quantities of government debt, but suggested that it could slow those purchases before long if the economy continues to strengthen.<\/p>\n
The central bank has been buying US$120 billion (S$160 billion) in mortgage-backed securities and Treasury debt each month since last year, but economists expect the Fed to begin slowing those purchases later this year or early next. Its policy interest rate is still set to near-zero, and is not expected to increase anytime soon.<\/p>\n
At a news conference following the Fed’s two-day meeting, Jerome Powell, the Fed chair, said that “the timing of any change in the pace of our asset purchases will depend on the incoming data.”<\/p>\n
“We’re going to continue to try to provide clarity as appropriate, on timing, pace and composition,” Powell, adding that the July meeting discussion was the first deep-dive into those issues.<\/p>\n
“I’d say we have some ground to cover on the labour market side,” Powell said, noting that he would “want to see” strong job numbers before declaring that the Fed’s “substantial further progress” standard has been achieved.<\/p>\n
“If things go well, then we will reach that goal, and when we reach it” then “we will taper at that time.”<\/p>\n
The central bank is trying to keep up with the evolving economy, which has shown marked improvement since the start of the year.<\/p>\n
But it wants to avoid pulling back its support too abruptly at a time when millions of jobs are missing compared to before the pandemic and as risks to the outlook persist. Those threats are only underscored by rising coronavirus cases in the United States and around the world tied to the Delta variant.<\/p>\n
Powell conveyed a generally optimistic tone about the economy on Wednesday, saying that “economic activity and employment have continued to strengthen,” even as he noted the room for improvement in the labour market.<\/p>\n
He cited virus fears, caregiving needs, and unemployment insurance benefits as factors keeping people out of work, and reasons the labour rebound “has a ways to go.”<\/p>\n
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