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US Federal Reserve Chair Jerome Powell. Source: Reuters
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  • US Federal Reserve Chair Jerome Powell says “if the economy evolved broadly as anticipated” the central bank will begin tapering asset purchases this year
  • At the Jackson Hole symposium on Friday Powell highlighted reduced unemployment and on-target inflation
  • However he warned of the risks of increasing cases on the Delta variant, with the US recording an average of 155,000 new cases per day in the past week
  • The next Federal Open Market Committee meeting is on September 21 and 22

The US Federal Reserve Chair Jerome Powell said the central bank would likely reduce its asset-buying program this year “if the economy evolved broadly as anticipated”.

The comments were made at the Jackson Pole Symposium on Friday, an annual meeting which brings together central bank leaders, academics and government officials. 

Mr Powell’s speech at the symposium was greatly anticipated, after tapering of the central bank’s US$120 billion (A$164.1 billion) per month asset-purchasing program was discussed at the Federal Open Market Committee (FOMC) meeting in July.

“My view is that the ‘substantial further progress’ test has been met for inflation,” he said. “There has also been clear progress toward maximum employment. At the FOMC’s recent July meeting, I was of the view, as were most participants, that if the economy evolved broadly as anticipated, it could be appropriate to start reducing the pace of asset purchases this year.”

In July, the unemployment rate fell from 5.9 to 5.4 per cent, compared to a pre-pandemic unemployment rate of 3.7 per cent in July 2019. 

Given the Federal Reserve’s target of ‘maximum employment’, all eyes will be on August’s payroll data which is set to be released this Friday. 

As well as assessing the incoming data, Mr Powell said the Federal Reserve would monitor evolving risks, noting the spread of the Delta variant. 

The US has been experiencing a surge in COVID-19 infections and over the past week the country has recorded an average of 154,864 new cases per day (figure as of August 28, 2021). 

Investors responded favourably to Mr Powell’s speech on Friday. The Nasdaq rose 1.2 per cent, the Dow Jones added 0.7 per cent and S&P 500 gained 0.9 per cent. 

The next FOMC meeting is on September 21 and 22. 

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