Cleaning up their mess starting AFTER 2022

Woodland Park CO

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For months, the U.S. central bank has been grappling with "how to manage the exit from the ultra-easy monetary policies" put in place in March 2020 to keep the economy afloat without triggering a market sell-off. At the Federal Open Market Committee's July meeting, "most" officials agreed it would probably be appropriate to begin reducing asset purchases before the end of the year, according to minutes from the gathering. While a handful indicated that it's best to wait until 2022, other officials have suggested they want to make a move as soon as next month. Powell hinted an announcement on tapering bond purchases could come as soon as next month during the virtual Jackson Hole conference, but with the lackluster August jobs report, most experts expect the U.S. central bank to delay until at least November as they assess the status of the labor market. Seema Shah, the chief strategist at Principal Global Investors, said the latest data throws the Fed's plans into "disarray." Even though inflation has been running well above the Fed's 2% target, Shah noted that policymakers have been more focused on ensuring the labor market heals than on tamping down consumer prices. "The Fed is currently much more focused on the employment recovery, implying that today’s very weak number will likely sway the Fed to a November taper, if not later," she said. There are three more scheduled Fed policy-setting meetings this year: Sept. 22, Nov. 3 and Dec. 15. After the Republicans take the House and Senate back, we have a real mess left to manage.