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It is “really appropriate” to double the Federal Reserve’s tapering pace due to the current state of the U.S. economy, inflation, and wages, Powell told reporters on Wednesday.
“The unemployment rate [is projected] to decline to 3.5% by the end of the year … while inflation will run above our 2% goal well into next year,” he said. “Price increases have now spread to a broader range of goods and services.”
Powell clarified that the risk of persistently higher inflation is now greater, which justifies accelerating tapering pace to $30 billion a month.
The Fed chair pointed out that the central bank will not raise rates until the taper is complete. “Buying assets is adding accommodation, raising rates is removing accommodation. Since we’re two meetings away from completing the taper, assuming things go as expected, if we want it to lift off before then, we would stop the taper potentially sooner. But it’s not something I expect to happen,” he said.
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