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Bill Dudley

The Federal Reserve Needs to Act on Powell’s Words

If central bankers don’t accelerate the taper at their policy meeting in two weeks, it’ll be too late.

Get on it, Jay.

Get on it, Jay.

Photographer: Jim Watson/AFP/Getty Images
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When the U.S. Federal Reserve holds its next policy-making meeting in mid-December, officials will face a tough decision: Whether to remove stimulus by cutting back more sharply on asset purchases, as Chair Jerome Powell suggested they might in his testimony to Congress this week. I think they should and probably will double the pace of tapering, setting a trajectory to end the asset-purchase program by mid-March.

No doubt, accelerating the taper only six weeks after initiating it would be a bold move, particularly given the economic uncertainties that the new Covid variant presents. Only a few weeks ago, I would have expected the Fed to stick to the original trajectory. But now the cost-benefit analysis has evolved, for three main reasons.