Fed Missed Opportunities for Earlier Taper and End to QE in 2021
The Federal Reserve could have reaped the benefits of an earlier decision to taper and end quantitative easing in 2021, according to remarks made by Bowman from Forexlive. This move would have paved the way for earlier rate hikes and provided flexibility for either slowing the pace of quantitative tightening or implementing a more gradual approach to balance sheet run-off.
Furthermore, it is suggested that the Fed should signal that quantitative easing is a temporary measure that will be unwound once market conditions return to normal. Mester emphasized the importance of using more descriptive language in FOMC statements to articulate the current economic assessment, its impact on the outlook, and the associated risks. It is anticipated that the Fed will reassess its communications strategy in the next policy framework review.
While the current policy settings were not addressed in Bowman’s comments, the focus remains on the intricacies of monetary policy and the nuances within the communique. The overarching sentiment seems to suggest that the Fed may be hesitant to take bold actions in the current economic landscape.
