The rise of cryptocurrencies could challenge the dominance of the US dollar, new Fed paper says

As a visual representation of the digital Cryptocurrency, Bitcoin sit on US Dollar on November 9, 2017 in Hong Kong, Hong Kong. Cryptocurrencies - Bitcoin, have seen unprecedented growth in 2017.
Bitcoin.

  • The increasing usage of cryptocurrencies could threaten the dominance of the US dollar, the Federal Reserve warned.
  • But the research paper Fed economists said it is unlikely this alone could “completely offset” the standing of the dollar.
  • The paper comes as the Fed is expected to publish soon a separate, highly anticipated report on CBDCs.
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The US dollar’s dominant role in global markets should continue, but the rapid rise of cryptocurrencies could threaten that status, according to a new paper by the Federal Reserve.

Private digital currencies, such as bitcoin and ether, as well as government-backed ones, may reduce reliance on the US dollar, Fed economists Carol Bertaut, Bastian von Beschwitz, and Stephanie Curcuru, wrote in their paper, “The International Role of the US Dollar.”

They cited changing consumer and investor preferences while new products could shift the balance of perceived costs and benefits.

“That said, it is unlikely that technology alone could alter the landscape enough to completely offset the long-standing reasons the dollar has been dominant,” the paper added.

The research paper comes as the Fed is expected to publish soon a separate, highly anticipated report on whether the US should issue central bank digital currency.

But key Fed officials are at odds. While Fed Chair Jerome Powell has expressed some openness towards CBDCs, other Fed officials, such as Vice Chair Randal Quarles, have been more skeptical.

Quarles in July said while public interest in a digital dollar has reached “fever pitch,” the US dollar is already highly digitized, an arrangement he said, “serves the nation and the economy well.”

In addition to digital currencies, the research paper from the Fed economists highlighted two other near-term challenges may affect the US dollar’s international status.

One is the continuing integration of Europe, a large economy with robust institutions and free trade, they said. In particular, the economists pointed to the European Union’s decision to issue a jointly-backed debt during the height of the pandemic.

“If fiscal integration progresses and a large, liquid market for EU bonds develops, the euro could become more attractive as a reserve currency,” they said. “This integration could potentially be accelerated by enhancements to the EU’s sovereign debt market infrastructure and introducing a digital euro.”

Another possible risk is the accelerating growth of China, a nation whose GDP is expected to exceed the US’s in nominal terms by 2023, the economists said.

Nevertheless, they are bullish the US dollar will remain attractive.

“Absent any large-scale political or economic changes which damage the value of the US dollar as a store of value or medium of exchange … the dollar will likely remain the world’s dominant international currency for the foreseeable future,” they added.

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Elizabeth Warren demands SEC investigate Fed officials’ investments, saying their transactions could be insider trading

Sen. Elizabeth Warren questions Internal Revenue Service Commissioner Charles Rettig during a Senate Finance Committee hearing June 8, 2021 on Capitol Hill in Washington, D.C. Federal Reserve Chairman Jerome Powell testifies during a Senate Banking, Housing and Urban Affairs Committee hearing on the CARES Act, at the Hart Senate Office Building on September 28, 2021 in Washington, DC.
Sen. Elizabeth Warren and Federal Reserve Chairman Jerome Powell.

  • Sen. Elizabeth Warren called on the SEC to investigate trades by three Fed officials.
  • “The reports of this financial activity by Fed officials raise serious questions about possible conflicts of interest and reveal a disregard for the public trust,” Warren wrote.
  • Warren also laid into Powell, a week after she vowed to oppose his re-appointment and called him a “dangerous man.”
  • See more stories on Insider’s business page.

Massachusetts Sen. Elizabeth Warren called on the Securities and Exchange Commission to investigate controversial trades by three Fed officials in a letter to the agency on Monday.

The two outgoing Fed officials, Boston Fed President Eric Rosengren and Dallas Fed President Robert Kaplan, resigned last week after disclosures emerged showing that the two men made active investments while in office. Rosengren cited health reasons for his resignation, while Kaplan made reference to the ongoing scandal.

In a separate set of disclosures last week, Fed Vice Chair Richard Clarida reportedly moved cash between funds a day before Fed Chair Jerome Powell issued a statement signaling future interest rate cuts. Clarida has not resigned from his post, and a Fed spokesperson said the transactions were “pre-planned” and had received “prior approval” from ethics officials.

Warren’s letter called the three men’s transactions “ethically questionable” and called on the SEC to investigate further.

“The reports of this financial activity by Fed officials raise serious questions about possible conflicts of interest and reveal a disregard for the public trust,” Warren wrote. “If they involved ‘purchasing or selling a security while in possession of material nonpublic information’ … they may have violated SEC’s insider trading rules.”

Warren also laid into Powell, a week after she vowed to oppose his re-appointment and called him a “dangerous man.”

“It is not clear why Chair Powell did not stop these activities, which corrode the trust and effectiveness of the Fed,” she wrote in the letter. “The Fed officials’ trades clearly run afoul of Fed guidelines.”

Powell has said that the Fed will re-evaluate its ethics rules, acknowledging they are not wide-ranging enough.

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Jerome Powell’s chances of another Fed term are slipping amid stock-trading controversies, betting markets show

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Fed Chair Jerome Powell is due to speak on Thursday.

Jerome Powell’s chances of being confirmed by the Senate as Fed chairman for another term in 2022 are slipping, according to data from betting-markets website PredictIt.

Powell’s chances have fallen from about 80% in August to 61% as of Monday morning. The sharp decline comes amid an ongoing stock trading controversy that has ensnared several Fed governors and led to the resignations of Boston Fed President Eric Rosengren and Dallas Fed President Robert Kaplan.

Annual financial disclosure forms found several Fed governors, including Powell, owned assets that the Federal Reserve was also buying as part of its COVID-19 stimulus program, including municipal bonds and treasuries.

On Friday, Bloomberg reported that Fed Governor Richard Clarida sold between $1 million and $5 million of bonds and used the proceeds to purchase stocks just one day before Powell issued a statement indicating a potential Fed policy change amid the beginning of COVID-19 pandemic last February.

The pressure on Powell mounted last week, with Senator Elizabeth Warren calling the Fed Chairman “a dangerous man” when it comes to his policies towards banks.

“Your record gives me grave concern. You have acted to make our banking system less safe, and that makes you a dangerous man to head up the Fed,” Warren told Powell, adding that she will oppose his renomination.

Another Fed governor, Lael Brainard, is a favorite among progressives to succeed Powell. Her chances of becoming the next Fed Chair have surged on PredictIt to 24% from single digits in the past month.

Regardless, the uncertainty is sure to remain as investors look to sort out who will be next chair, Fundstrat’s Tom Lee said in a Monday note. “Markets don’t like uncertainty, so this will hang over markets for the next few months,” Lee said.

Powell’s term as Fed chair ends in February 2022, while his term as a Fed governor ends in January 2028.

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The Senate’s banking committee chief will introduce legislation to ban Fed officials from owning individual stocks

Sherrod Brown
Senator Sherrod Brown.

  • Senate Banking Committee Chairman Sherrod Brown wants to ban Fed officials from owning individual stocks.
  • Brown reportedly said Tuesday he’ll introduce legislation to get work on the ban underway.
  • Fed Presidents Eric Rosengren and Robert Kaplan are stepping down following stock controversies.
  • See more stories on Insider’s business page.

Sen. Sherrod Brown, chairman of the Senate Banking Committee, said Tuesday he will introduce legislation to ban officials working at the Federal Reserve from owning individual stocks, after controversial equity holdings by two of the central bank’s regional presidents came to light.

Brown, a Democrat from Ohio, told Federal Reserve Chairman Jerome Powell of his plan during Powell’s appearance at a hearing held by the bank committee on Tuesday, according to Reuters.

Boston Fed President Eric Rosengren and Dallas Fed President Robert Kaplan in recent weeks have been under fire for stock purchases during the pandemic, with critics raising questions about conflict of interest because of their roles in shaping US monetary policy. On Monday, they said in separate statements they would step down from their positions.

At a Fed meeting last week, Powell said that “no one [at the Fed] is happy” about the situation and announced a fresh review of the ethics rules surrounding stock trades.

Kaplan made million-dollar trades in stocks of companies including Tesla and Amazon, according to a disclosure form provided by his bank that was first reported by The Wall Street Journal. Rosengren reportedly actively traded real estate investment trusts. Kaplan and Rosengren earlier this month apologized and dumped their purchases.

Kaplan said he will leave on Oct. 8 and addressed the controversy in a statement from the Dallas Fed.

“The Federal Reserve is approaching a critical point in our economic recovery as it deliberates the future path of monetary policy. Unfortunately, the recent focus on my financial disclosure risks becoming a distraction to the Federal Reserve’s execution of that vital work,” Kaplan said.

Rosengren said he would resign effective Thursday, citing health issues. Rosengren, whose term would’ve been up in June 2022, revealed he has a kidney condition and needs dialysis.

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Elizabeth Warren calls Fed Chair Powell a ‘dangerous man’ and vows to oppose his renomination

Sen. Elizabeth Warren questions Internal Revenue Service Commissioner Charles Rettig during a Senate Finance Committee hearing June 8, 2021 on Capitol Hill in Washington, D.C. Federal Reserve Chairman Jerome Powell testifies during a Senate Banking, Housing and Urban Affairs Committee hearing on the CARES Act, at the Hart Senate Office Building on September 28, 2021 in Washington, DC.
Sen. Elizabeth Warren and Federal Reserve Chairman Jerome Powell.

  • Elizabeth Warren told Fed Chair Jerome Powell he’s a “dangerous man” and should not be renominated.
  • She said Powell has weakened oversight over big banks and has made the banking system unsafe.
  • Other progressives voiced similar concerns, saying a more climate-focused person should run the Fed.
  • See more stories on Insider’s business page.

Democrats are split over whether the current chair of the Federal Reserve, Jerome Powell, should be nominated for another term.

But Massachusetts Sen. Elizabeth Warren made her stance very clear on Tuesday: She will oppose a second term for Powell over what she views as weakness on regulating Wall Street.

“Your record causes me grave concern: over and over you have acted to make our banking system less safe,” Warren told Powell during a Senate banking hearing. “That makes you a dangerous man to head up the Fed, and that’s why I’ll oppose your renomination.”

Powell joined Treasury Secretary Janet Yellen to testify before the Senate on how they are working to ensure an equitable recovery from the pandemic. But, as Warren noted, the “elephant in the room” was whether Powell would be nominated and confirmed by the Senate for a second term leading the Fed. She said his policies during his first term makes him unfit for renomination.

Specifically, she called out Powell for weakening stress tests, which were designed to determine whether banks can survive without taxpayer dollars. She said that in 2019, the Fed began giving banks the information they would need to pass the tests. While the Fed said its aim in sharing that information was to appear transparent, Warren argued it weakened Fed oversight over those banks.

Powell disagreed with that assessment, and he said during the hearing he didn’t think the stress test had been weakened during his term and that he’s “prepared to look at anything we did” that would suggest otherwise.

Warren has not been alone in opposing Powell’s renomination. Insider reported last month that progressives in the House, including New York Rep. Alexandria Ocasio-Cortez, urged President Joe Biden to oust Powell in exchange for a more climate and equality-focused central bank.

A collection of 22 economic, labor, and racial justice organizations also wrote to Biden last month urging him to consider a Fed chair who more heavily prioritizes climate change, full employment, and fighting systemic racism.

But other Democrats disagree. Jon Tester, a centrist Democrat from Montana, told the Wall Street Journal that a Fed chair “should not be involved in the political footballs thrown around on Capitol Hill.”

“That’s the reason I want Jerome Powell,” Tester added. “He’s proven he can maintain the independence of the Fed.”

Powell’s term is set to end in February, and despite progressive opposition, Bloomberg reported that Biden advisers are leaning toward recommending him for a second term.

Warren adamantly disagreed with that during the hearing. “Re-nominating you means gambling that for the next five years, a Republican majority at the Federal Reserve with a Republican chair, who has regularly voted to deregulate Wall Street, won’t drive this economy over a financial cliff again,” Warren told Powell. “And with so many qualified candidates for this job, I just don’t think that’s a risk worth taking.”

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The Fed presidents who faced calls to resign over their controversial stock trading during the pandemic are stepping down

FILE PHOTO: The Federal Reserve Bank of Boston's President and CEO Eric S. Rosengren speaks in New York, April 17, 2013. REUTERS/Keith Bedford/File Photo
Boston Fed President Eric Rosengren.

  • Boston Fed President Eric Rosengren and Dallas Fed president Robert Kaplan are stepping down.
  • Both had been criticized for investments during the pandemic in firms including Apple, Alibaba, and Tesla.
  • Last week, Fed Chair Jerome Powell announced a fresh review of the ethics rules surrounding stock trades.
  • See more stories on Insider’s business page.

Boston Federal Reserve President Eric Rosengren said on Monday that he is resigning several months early due to health issues, following recent controversy over his stock purchases.

On Monday afternoon, Dallas Fed President Robert Kaplan announced that he would also be resigning in October, citing the “distraction” of his own much-criticized stock trades.

In a letter to Fed Chair Jerome Powell, Rosengren said he would step down effective Thursday to focus on his health.

“While working on the pandemic relief programs for money market mutual funds and small businesses, given the long hours and stress, regrettably my kidney function declined significantly to the point that I qualified for the kidney transplant list,” he wrote.

Rosengren, who is 64, said that preparations had been underway for his retirement next year, as Fed presidents are age-limited at 65 in most cases.

His letter did not mention the stock-trading scandal that has roiled the Fed in recent weeks, sparked by disclosures that Rosengren and Dallas Fed President Robert Kaplan had purchased stock in several big-name firms including Apple, Alibaba, and Tesla. That prompted calls by activists and former Fed officials for Rosengren and Kaplan to step down or be fired.

In particular, Rosengren also made active trades in real estate investment trusts, raising eyebrows about past comments he has made about risks to real estate markets.

At a Fed meeting last week, Powell said that “no one [at the Fed] is happy” about the situation and announced a fresh review of the ethics rules surrounding stock trades.

“We understand very well that the trust of the American people is essential for us to effectively carry out our mission, and that’s why I directed the Fed to begin a comprehensive review of the ethics rules around permissible financial holdings and activity by Fed officials,” said Powell.

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Fed risks tapering surprise, stock market shock as central bank’s inflation forecast not ‘credible’, says Wharton’s Jeremy Siegel

Jeremy Siegel, Russell E. Palmer Professor of Finance at the Wharton School of the University of Pennsylvania in Philadelphia, on an interview on December 30, 2014.
Jeremy Siegel, professor of finance at the Wharton School of the University of Pennsylvania.

Wharton finance professor Jeremy Siegel said he does not think the Federal Reserve’s inflation outlook is “credible,” and believes the central bank risks scaling back its monetary policy sooner than expected.

This, he told CNBC Friday, will shock the stock market in early 2022.

“I look at these inflation forecasts that the Fed put, I don’t find them credible at all,” he said, referring to the central bank’s 4.2% target this year and its 2.2% target next year. “We’re going to have much more inflation.”

He continued: “When you see worse inflation, the Fed is going to be pressured and that’s going to disturb the market and that’s down the line.”

Siegel added the US economy can expect “a couple more” bad consumer price index reports towards the end of the year. But in the next two months, he said “the road looks clear” since the Fed will be continuing with its program.

“Powell opened the door saying, if things get worse, we will have to taper faster,’ Siegel told CNBC. “If that happens toward the end of the year, that would rattle the market.”

Siegel also called on the central bank to be more aggressive in containing inflation. He did note that there is not much the Fed can do when it comes to controlling rising prices. Attempting to do so, he noted, will “trouble” the market and the economy.

“I worry actually about an overreaction. Because a lot of that inflation that we’re going to have, I think it’s already there in the pipeline,” Siegel told CNBC. “The Fed can’t really do anything about it.”

The outlook from the Federal Open Market Committee meeting that concluded on Wednesday indicated that tapering asset purchases may “soon be warranted.” Half of the Fed officials expect the first rate hike to arrive by next year.

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Fed’s Powell says he wasn’t aware two top policymakers were actively trading stocks as he promises a review of rules

Jerome Powell
Jerome Powell.

  • Fed Chair Jerome Powell said he wasn’t aware of “specifics” behind stock trades made by two top policymakers while in office.
  • He avoided saying he has confidence in Dallas and Boston Fed presidents Robert Kaplan and Eric Rosengren in a press conference Wednesday.
  • Powell pledged to review the rules for Fed officials, saying: “We need to make changes, and we’re going to do that as a consequence of this.”
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Federal Reserve boss Jerome Powell has said he wasn’t aware of the specific trading activity carried out by two regional Fed presidents, and brushed off the chance to back the top policymakers facing questions about apparent conflicts of interest.

Powell was asked Wednesday whether he still has confidence in Dallas Fed President Eric Rosengren and Boston Fed President Robert Kaplan being able to do their jobs.

“In terms of having confidence and that sort of thing, I think, no one is happy. No one on the (Federal Open Market Committee) is happy to have these questions raised,” he responded in a post-Fed meeting press conference.

Financial disclosures first reported by The Wall Street Journal showed Kaplan and Rosengren made multimillion-dollar trades, some in popular stocks such as Apple and Tesla. These came as the Fed significantly expanded its asset purchases to provide unprecendented support for the pandemic-hit US economy.

Both have expressed regret for their investment decisions and have pledged to divest their money by the end of this month to avoid any possible conflict of interest. Some advocacy groups have called for the Fed presidents to resign from their positions, arguing that their actions could make Americans lose trust in the central bank.

Powell said that before media reports of their stock trades, he hadn’t known of the policymakers’ actions.

“I was not aware of the specifics of what they were doing,” he said.

Pointing to three existing restrictions, Powell noted Fed officials are already subject to certain rules around securities. First, ownership of certain assets, such as bank securities, is not allowed. Second, there are specific times – such as around FOMC meetings – when officials are not allowed to trade at all or to buy or sell financial assets. Third, officials must make annual financial disclosures.

“This has been our framework for a long time, and I guess you’d say it’s served us well,” Powell said. “The other thing you would say: that it is now clearly seen as not adequate to the task of really sustaining the public’s trust in us.”

“We need to make changes and we’re going to do that as a consequence of this,” he added.

The Fed will carry out a thoroughgoing and comprehensive review and consider ways to further tighten rules and standards, Powell promised. However, he would not be drawn on a timeline or to suggest what changes could be made.

When it came to talking about his own holdings, Powell said he has owned municipal securities – which the Fed bought last year for the first time – for many years.

But Powell said the holdings were a “coincidence,” because he hadn’t expected the Fed to buy munis to prevent a collapse in the market. He isn’t an active trader, he added, saying he had cleared any conflicts of interests with ethics officials.

“Munis were always thought to be a pretty safe place for a Fed person to invest because the law was that the Fed would never buy municipal securities,” he said.

Read More: JPMORGAN: Buy these 16 housing stocks to partake in the ongoing boom, with fears of a 2008-style crash overblown despite some real risks

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Fed Chair Powell says he’s powerless to protect the economy if Congress lets the US default on its debt

Jerome Powell hearing
Fed Chair Jerome Powell.

  • Nobody should assume the Fed can save the US economy if Congress fails to raise the debt limit, Jerome Powell said.
  • If the ceiling isn’t raised, the US could default on its debt and enter a self-inflicted recession.
  • A debt-ceiling downturn is “just not something we can or should contemplate,” the Fed chair said.
  • See more stories on Insider’s business page.

The Federal Reserve won’t come to the economy’s rescue if the US defaults on its debt, central bank chair Jerome Powell said Wednesday.

Congress is, once again, coming dangerously close to a debt-ceiling crisis. Lawmakers have until mid-October to either raise or suspend the borrowing limit or allow the US to default on its debt. The latter outcome would freeze spending on several critical public programs, spark massive job losses, throw financial markets into chaos, and likely plunge the US into a self-inflicted recession.

In other words, defaulting on government debt is “just not something we can or should contemplate,” Powell told reporters in a press conference. Failure to raise the ceiling could spark “severe damage to the economy,” and the ball is solely in lawmakers’ hands, the Fed chair added.

“I think we can agree the United States shouldn’t default on any of its obligations and should pay them when due,” he said. “No one should assume that the Fed or anyone else can protect the markets or the economy in the event of a failure.”

Debt scares aren’t anything new to those on Capitol Hill. The ceiling has already been suspended or lifted 57 times in the last five decades. But the 117th Congress is on track to be the first to break the threshold.

Republicans have been adamant that raising the ceiling is Democrats’ responsibility alone. Senate Minority Leader Mitch McConnell reiterated his opposition to the effort on Wednesday, saying Democrats shouldn’t “play Russian roulette with our economy.”

On the other side of the aisle, Democrats are pinning the blame on Republicans’ past actions. Lifting the limit only allows the government to cover its past spending. After the GOP and President Donald Trump added roughly $8 trillion in debt through tax cuts and stimulus, Republicans “are threatening not to pay the bills,” Senate Majority Leader Chuck Schumer tweeted Wednesday.

Schumer and House Speaker Nancy Pelosi revealed on Monday a measure that would suspend the limit through December. Yet fervent GOP opposition, a fragile Democratic majority in the Senate, and a looming deadline stand in the way of its passage.

What’s at stake if the US defaults

As lawmakers barrel toward the threshold, experts have painted a dismal picture of what a US default would look like. The White House told state and local governments on Friday that failing to lift the ceiling would swiftly freeze funding for programs including Medicaid, the Children’s Health Insurance Program, and FEMA disaster relief. The resulting recession would prompt “economic catastrophe,” Treasury Secretary Janet Yellen added Monday.

Outside the White House, assessments have been even bleaker. Failure to lift or suspend the ceiling would power a downturn reminiscent of the 2008 financial crisis, Moody’s Analytics economists led by Mark Zandi said Tuesday. The US would shed nearly 6 million jobs, and the unemployment rate would leap to 9% from 5.2%.

The resulting market crash would also cripple everyday Americans. Stock prices would tumble more than 30% before recovering, the team said. Losses from the selloff would total $15 trillion in household wealth, according to Moody’s.

Such a slump would also come as the country remains mired in a COVID-slammed economy. The Fed held its ultra-accommodative policy intact on Wednesday, leaving key supports in place as 8.4 million Americans remain unemployed. Powell hinted that a pullback could start in November, but even then, it will likely take years for Fed policy to fully return to pre-crisis norms.

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Fed officials signal the reversal of emergency pandemic support might come soon

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Jerome Powell said the Fed is looking into how a digital dollar would work.

  • The Federal Reserve hinted Wednesday it might soon reverse its emergency asset purchases.
  • The purchases aided financial markets and supported the economic recovery since they started in March 2020.
  • If the recovery continues as expected, the Fed could start shrinking the purchases “soon,” the central bank said.
  • See more stories on Insider’s business page.

On Wednesday, the Federal Reserve inched closer to announcing its reversal of the pandemic-era support that’s aided financial markets throughout the crisis, signaling the pullback could arrive before the end of the year.

The Federal Open Market Committee held interest rates near zero and maintained the size of its emergency asset purchases after meeting on Tuesday and Wednesday. The ruling extends the ultra-easy monetary policy set by the Fed in March 2020 to prop up the US economy.

The central bank has long indicated it will keep its support in place until “substantial further progress” toward stronger inflation and maximum employment were met. The recovery has since made progress toward both targets and officials could soon start the process of retracting the policy aid, the Fed said in a Wednesday statement.

“If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted,” the central bank said.

The Fed has been buying at least $80 billion in Treasurys and $40 billion in mortgage-backed securities each month to support financial markets and ease monetary conditions. The purchases are the first policies set to be normalized, with interest rate hikes set to follow.

That tapering process is no easy feat. Financial markets largely expect a tapering announcement after the FOMC’s November meeting. Starting the process even later would suggest the economy isn’t as healthy as expected. And shrinking the purchases before the anticipated date could shock investors and trigger panic selling.

Fed Chair Jerome Powell noted in a Wednesday press conference the tapering process could be swift if the recovery holds strong. FOMC members could start shrinking the purchases as soon as their November meeting, and the taper could be completed just months later, Powell said.

“Participants generally view that, so long as the recovery remains on track, a gradual tapering process that concludes around the middle of next year is likely to be appropriate,” he said, adding the committee hasn’t made a decision on the exact timing.

The criterion required for the Fed to consider rate hikes are much more stringent. The timing and pace of the upcoming taper won’t hint at when rate lift-off will arrive, Powell said.

FOMC

Economic projections updated by the Fed on Wednesday reveal the committee isn’t united in its rate-hike timeline. Half of its 18 members expect the first rate hike to arrive next year, with three expecting rates to climb above 0.5%. The other nine see near-zero rates lasting through 2022.

The median projections practically ensure a rate hike will arrive by the end of 2023, with all but one member expecting higher rates that year.

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