asset purchases soon reduced, but “premature” to raise interest rates

The American Central Bank (Fed) estimates that “The moment is near” to start reducing its asset purchases, but “premature” to raise key rates soon, its president said on Friday, 10 days before the next monetary meeting.

“As the time draws near to cut back on our asset purchases, it would be premature to tighten policy by raising rates now” as this would “slow job growth”, said Jerome Powell, during a virtual conference. “We are on the right track to start gradually reducing our asset purchases which, if the economy evolves broadly as expected, will be completed by the middle of next year.”, he said again.

$ 120 million per month

Asset purchases, one of the Fed’s anti-crisis tools, amount to $ 120 billion per month. The institution wants, now that the economic recovery has started, to reduce them gradually to zero. The timetable is expected to be announced at the Fed’s next monetary committee meeting on November 2-3, and cuts begin the same month. Key rates, lowered in March 2020 to a range of 0 to 0.25%, will however have to wait a while before taking off again.

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