(Reuters) – Federal Reserve Chair Jerome Powell’s highly anticipated speech to the Jackson Hole economic conference on Friday will likely offer few new hints about when the U.S. central bank may start reducing its massive asset purchases, analysts said.
But Powell could tackle the sensitive task of explaining why tapering the $120 billion in monthly purchases of Treasuries and mortgage-backed securities doesn’t mean an imminent interest rate hike, advancing an effort by Fed policymakers to keep traders from pushing up borrowing costs more than the central bank may feel is warranted or healthy for an economy with millions still unemployed.
“He will do his best to say these are independent decisions … and one does not necessarily speed up the other,” said Steve Kelly, a professor at the Yale School of Management. “That’s the biggest challenge … this communication around tapering and rate increases.”
Fed officials agree.
The minutes of their July 27-28 policy meeting show that many thought it would be important to emphasize there is no “mechanical link” between a bond-buying taper and rate hikes.
Rejecting that link won’t be simple. Many Fed officials also felt it would be better to end the bond-buying program…