Fed Will Punt on the Economy, Inflation and Asset Prices
Chair Jerome Powell must deal with growing dissension within his ranks and intensifying expectations for cutting back on bond purchases.
Fed Chair Jerome Powell has some trouble on his hands.
Photographer: Al Drago/Bloomberg
With few expecting the Federal Reserve to begin tapering when it announces the outcome of its latest policy deliberations on Wednesday, the focus of economists and market participants will be not only on hints of when and how such a taper may come but also on the challenges Chair Jerome Powell is likely to face in maintaining harmony within an increasingly divided Federal Open Market Committee. The outcome of both will depend on specifics related to the economy, inflation and asset prices.
A new Covid-related cloud has settled over U.S. economic growth prospects. Its cause is the delta variant which, as in many other countries, is proving much more infectious than other iterations, especially among the unvaccinated population. Fortunately, and consistent with the experience of the U.K., which has tended to lead the U.S. on Covid issues by four to eight weeks, the notable rise in Covid cases is not being accompanied by a sharp increase in hospitalizations and deaths, though the risk of long Covid is a concern.