The central bank said it could soon cut back on some of its bond purchases, and about half of Fed policymakers expect to raise interest rates by end of next year.
Despite a still-menacing pandemic and a cascade of other domestic and international threats to the U.S. economy, Federal Reserve policymakers on Wednesday expressed confidence in the recovery and said they could soon start withdrawing stimulus programs supporting financial markets and the economy.
Nonetheless, Fed policies showed the limitations of the central bank’s weapons for attacking the economic problems of less affluent, less well-educated and less highly skilled Americans. And the sagging incomes and COVID-related job losses of that segment of the population remain a major drag on recovery.
“We have famously broad and blunt tools,” said Jerome H. Powell, the Fed’s chairman, speaking at a virtual news conference Wednesday. “I think eliminating inequality and racial discrimination and racial disparities and that kind of thing is really something that fiscal policy and other policies frankly — education policies and that kind of thing — are better at focusing on.”
At the top of Fed officials’ concerns is the virulent Delta variant of the coronavirus, which appears to be slowly trending down in terms of new cases but has hit parts of the country very hard. Overall the variant has damped consumer sentiment and economic activity, including hiring., which could lead to a U.S. government default by the end of October if the U.S. Treasury is unable to borrow more and can’t pay its bills.
But the new strategy, partly reflecting its desire to be less reliant on U.S. and Western technologies, is certain to cause short-term pain and will probably slow China’s growth, which will be felt broadly as China is the world’s second-largest economy.
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