Fed buying cuts in 2021

In an online conference replacing the traditional one in Jackson Hole, Fed Chairman Jerome Powell announced the start of asset purchase rate cuts this year.

Major stock market indices, the Dow Jones, S&P 500 and Nasdaq Composite, rose in trading on Friday on the back of long-awaited announcements from Fed Chairman Jerome Powell.

As part of the Fed's annual symposium in Jackson Hole, which again this year took the form of a web conference, Powell said that the economy had reached a point where it no longer needed so much policy support.

Earlier, several Fed policymakers said they believe it is appropriate to begin cutting current quantitative easing policy in October and November, given the continued economic progress in the US.

Chairman said he sees the utility of starting to reduce the pace of asset purchases this year, but at the same time he did not give a specific timing or size of the bond purchases, indicating that the Fed would make decisions given the impact of the COVID Delta strain on the US economy, "thoroughly check all risks".

At the same time, the central banker said that there is still a long way to go before interest rates are raised.

In response to concerns about the spike in US inflation from many economists and market experts, Powell reiterated his words about its temporary nature. In his view, the current rise in inflation is influenced by a number of factors, from problems in supply chains, which are likely to diminish over time, to globalisation acting as an anchor for prices. He stressed the importance of the Fed not taking "untimely policy steps" in response to temporary economic fluctuations, such as this year's change in inflation.

Powell also said that the current key factor that will influence the Fed's decision to proceed with consideration of a rate hike will be progress in the labour market recovery. The Fed believes that the Covid Delta strain "poses a short-term risk" to a return to full employment. Expectations for continued job growth are based on a resurgence in the restaurant and tourism sectors, the reopening of schools and a corresponding lack of need to stay home for childcare.

Analysts' forecasts about the Fed's statements at the Jackson Hole conference came true and the central bank is maintaining its cautious stimulus policy for the US economy to achieve a full recovery.