When Jerome Powell steps up to the podium Friday at the Federal Reserve’s annual economic symposium, held virtually this year but traditionally near Jackson Hole, Wyo., he’s likely to deliver a speech that has had many revisions in the past two months.
While many market participants expect the Fed chair to announce a date and pace for tapering it’s $120 billion a month of bonds purchases, the dominance of the Delta variant of Covid-19 makes such a pronouncement less certain, some economists say.
“I was expecting him to maybe announce plans for tapering but the increase in the Delta variant makes it less likely,” said David Beckworth, a former international economist at the U.S. Treasury Department. “We know for certain there’s more caution but the economy is still growing rapidly, inflation is high,” said Beckworth, now a senior fellow at the Mercatus Center at George Mason University. “I think you can make a case for why they might still go ahead and taper.”
Some crypto analysts see tapering as an obstacle for bitcoin speculation, since quantitative easing is generally thought to give investors the liquidity to invest more in riskier assets. Because of macroeconomic uncertainty created by the course of the pandemic, bitcoiners may be able to continue to count on quantitative easing staying at the same pace or tapering at a slower pace than might have been expected a few months ago – when coronavirus-related restrictions looked to be nearing an end, as vaccines became more widely distributed.
In last month’s Fed meeting minutes, officials at the central bank expressed an interest in delinking quantitative easing from interest rates, which could give the Fed more flexibility to maneuver without causing a “taper tantrum,” wherein market expectations for the Fed funds rate go up because investors expect interest rate hikes to follow, Kelly said.