Your Money
In response to the economic shutdown in 2020, the Federal Reserve (Fed) cut its benchmark interest rate near zero and began purchasing $120 billion a month of Treasury and mortgage bonds to provide extra stimulus to the economy.
In Fed Chair Jerome Powell's testimony last week, he said they were nowhere near considering raising rates. However, the first form of stimulus removal will be to reduce, or taper, their monthly bond purchases. Chairman Powell noted he would like to see more hiring first, but also mentioned there is a range of views on that within the committee.
The last time the Fed did this was in 2014, removing stimulus put in place during the Great Financial Crisis of 2008. The very mention of that future plan in 2013 was a surprise to those who figured stimulus was a permanent stance. It caused significant, yet short-lived, losses in both the stock and the bond market. That rare event was coined the Taper Tantrum. Powell doesn't want to repeat that message so has been fairly candid with his remarks.
Fed Says Economy Has Progressed Toward Goals, Tees Up Bond Taper
by Nick Timiraos
|
