The Fed’s Exit Strategy
On Wednesday, Chairman of the Federal Reserve, Jerome Powell, said the Fed would start slowing down its bond purchases “well before” raising interest rates.
Powell said, “We will taper asset purchases when we’ve made substantial further progress toward our goals, from last December when we announced that guidance. That would likely be before — well before — the time we consider raising interest rates.” Powell said he believes it is unlikely that the Fed will raise interest rates this year — the central bank forecasts rates staying near zero through 2023.
Since last June, the Federal Reserve has been purchasing around $120 billion in Treasury debt and mortgage-backed securities every month to keep long-term borrowing rates down. The Fed has maintained that the economy must make substantial strides towards its targets of full employment and 2% inflation before it reduces its bond purchases.
In addition to giving an update on the Fed’s exit strategy from its aggressive monetary policy, Powell also commented on cryptocurrencies after the crypto exchange Coinbase debuted on the Nasdaq. Coinbase’s valuation closed at $86 billion Wednesday.
Powell said cryptocurrencies are “really vehicles for speculation” and that “they’re not really being actively used as payments.” He then compared cryptocurrencies to gold, stating, “for thousands of years, human beings have given gold a special value that it doesn’t have.”
In February, former chair of the Federal Reserve and current US Treasury Secretary Janet Yellen also said she viewed cryptocurrencies as a highly speculative asset and said it is an “extremely inefficient way of conducting transactions.”
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
