Jerome Powell Says Fed’s Tightening Program May Be Approaching The End In ‘Coming Months’

Federal Reserve Chair Jerome Powell on Tuesday said that the central bank’s tightening program may be approaching the end in the “coming months.”

Speaking at the National Association for Business Economics’ conference in Philadelphia, Powell shed light on where the central bank’s quantitative tightening program stands right now.

“Our long-stated plan is to stop balance sheet runoff when reserves are somewhat above the level we judge consistent with ample reserve conditions. We may approach that point in coming months, and we are closely monitoring a wide range of indicators to inform this decision,” he said.

Powell noted that signs have begun to emerge indicating that liquidity in the financial system is “gradually tightening.” However, he added that normalizing the Fed’s balance sheet “does not mean going back to the balance sheet we had before the pandemic.”

He also touched upon the labor market weakness. “While the unemployment rate remained low through August, payroll gains have slowed sharply, likely in part due to a decline in labor force growth due to lower immigration and labor force participation. In this less dynamic and somewhat softer labor market, the downside risks to employment appear to have risen.”

Powell’s remarks come ahead of the Federal Open Market Committee’s (FOMC) October meeting, scheduled for October 28 and 29. According to data from the CME FedWatch tool, there is a 96.7% probability of a 25 basis point interest rate cut.

The Fed Chair also did not commit to further rate cuts. “There is no risk-free path for policy as we navigate the tension between our employment and inflation goals,” Powell said. 

Meanwhile, U.S. equities were mixed in Tuesday morning’s trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was up 0.24%, the Invesco QQQ Trust ETF (QQQ) edged lower by 0.08%, while the SPDR Dow Jones Industrial Average ETF Trust (DIA) gained 0.67%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘neutral’ territory.

The iShares 7-10 Year Treasury Bond ETF (IEF) was up 0.18% at the time of writing.

Also See: US Trade Representative Greer Calls China’s Rare Earth Controls ‘Completely Disproportionate’: Report

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