Powell "Tapering Expansion to Be Discussed at Next Month's FOMC"‥US Stock Market Declines Widen (Update)

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] Jerome Powell, Chairman of the Federal Reserve (Fed), announced that despite the emergence of the Omicron COVID-19 variant, the Fed will accelerate the pace of tapering asset purchases. Following Powell's remarks, the U.S. stock market deepened its losses, while Treasury yields narrowed their declines.

On the 30th (local time), Powell appeared at a Senate hearing and said, "The economy is very strong and inflationary pressures are high, so it is appropriate to consider finishing tapering early." He expected this to be discussed at the upcoming Federal Open Market Committee (FOMC) regular meeting next month.

The Fed announced after the FOMC meeting earlier this month that it would reduce asset purchases by $15 billion per month and indicated that starting January next year, the pace of purchases could be adjusted depending on changes in economic outlook.

If tapering is completed in the first half of next year, the timing for the Fed to begin raising interest rates will also be brought forward. The market is anticipating the possibility of the first rate hike in June next year.

In his prepared remarks released the day before, Powell warned that the Omicron variant could delay the U.S. economic recovery and accelerate inflation.

Following comments by Moderna CEO St?phane Bancel that current vaccines may be vulnerable to the Omicron variant, major indices on the New York Stock Exchange, which had been weakening, widened their losses after Powell’s remarks.

The Dow Jones Industrial Average fell more than 500 points intraday, dropping over 1.4%. The S&P 500 index declined 1.37%, and the Nasdaq index was down 1.4%.

As demand for safe-haven assets increased, U.S. Treasury yields, which had fallen to 1.412%, rebounded to 1.5% after Powell’s remarks before sliding back to 1.465%, showing a rollercoaster pattern.