Fed Chair says US may soon start reducing massive economic support

Federal Reserve Chairman Jerome Powell said on Friday the US continues to recover from the pandemic recession, and that progress could allow the central bank to dial back its extraordinary efforts to prop up the economy later this year.

Report informs, citing foreign media, that Powell cautioned, however, that the recovery remains uneven and unpredictable, and said the Fed will continue to monitor incoming data and adjust its policies as needed.

The Fed chairman addressed an annual economic conference that’s usually held in Jackson Hole, Wyoming. A spike in new coronavirus cases forced organizers to move the meeting online just a week ago, highlighting the uncertainty that forecasters have had to reckon with throughout the pandemic.

“Labor market conditions are improving but turbulent,” Powell said. “And the pandemic continues to threaten not only health and life, but also economic activity.”

Powell’s speech comes as he and other policymakers are trying to decide when the Fed should start to phase out its aggressive bond-buying program.

The central bank has been buying at least $120 billion worth of Treasury and mortgage-backed securities every month in an effort to prop up the economy by keeping borrowing costs low.

At their last meeting in July, policymakers said the job market was not yet strong enough to slow those purchases, but most thought it could be later this year.

In his speech, Powell reaffirmed that timetable without providing specifics, but said policymakers will continue to monitor evolving risks.

Investors seemed to welcome the Fed chairman’s cautious approach. Stock indexes rose during the speech, with the Dow Jones Industrial Average up more than 200 points mid-morning.

Employers have been on a hiring spree, adding nearly 1.9 million jobs in June and July. But the U.S. has yet to replace about 25% of the jobs that were lost in the early months of the pandemic. And millions of people who left the workforce during that period have yet to return, prompting employers to complain about a labor shortage.

Many forecasters hope to see a jump in job applicants this fall, as children go back to school and supplemental unemployment benefits run out across the country. But the surge in new coronavirus infections tied to the delta variant has put that optimistic outlook in doubt.

“While the Delta variant presents a near-term risk, the prospects are good for continued progress toward maximum employment,” Powell said.