This is one of the key questions central bankers face when they gather this week for an annual meeting in Jackson Hole, Wyoming.
What’s going on: The event, which typically includes central bankers from around the world, will be a streamlined affair due to the pandemic. Neither European Central Bank President Christine Lagarde nor Bank of England Governor Andrew Bailey will be in attendance.
At its current rate, the Fed would recover around $ 480 billion in assets between September and December. But the debate has intensified as to whether this is really necessary.
“It’s harder to argue now [that] the Fed must continue with these emergency support measures, “Andrew Hunter, senior US economist at Capital Economics, told me.
On Bridge: Most Fed watchers agree news of Jackson Hole bond purchases is unlikely, although President Jerome Powell’s speech on Friday is being watched closely. Instead, they believe the Fed will officially announce its intention to start cutting bond purchases in September, with the change taking place before 2022. (Although the Delta variant remains a major unknown.)
The Federal Reserve has only launched two large-scale asset purchase programs in its history – one after the 2008 financial crisis and the other in response to the pandemic. It is therefore difficult to determine how the financial markets and the real economy will react.
Some fear that the financial markets are panicking. The memory of the “taper tantrum” of 2013 still looms large, when the Fed’s announcement that it would eventually slow down asset purchases triggered a sharp drop in the bond market.
“There is always a risk of short-term turbulence,” said Randall Kroszner, who served as governor of the Federal Reserve between 2006 and 2009.
But this recovery looks very different from the one that followed the financial crisis, according to Michael Skordeles, senior US macro strategist at Truist Advisory Services.
“In a lot of industries things look very solid,” he said. “This was not the case in 2013.”
Even then, the short-term shock to the markets had little effect on the real economy, Kroszner said. Even if interest rates rise slightly as the Fed changes course, they will likely stay very close to their all-time lows.
The hope is that by starting to step back this year, the Fed can pull back slowly without causing too much uproar.
“Starting earlier allows them to do it even more gradually,” Skordeles said.
For employers, these are the vaccination mandates against worker shortages
At Kevin Smith’s home health care agency in Massachusetts, only 52% of its 400 staff have been vaccinated. He would like to order them all to get shot, but he says he can’t risk a mass exodus.
“It puts you at risk of alienating your staff or even losing them to a competitor,” said Smith, who has run the family business Best of Care since 2013. “No one can afford to do that. This is why any employer in our industry is so reluctant to impose a mandate. ”
Take a step back: Employers are faced with a record number of vacancies and a shortage of candidates. This puts companies that might otherwise consider requiring vaccinations in a difficult position, writes my CNN Business colleague Chris Isidore.
Among unvaccinated workers asked about what they would do if their employer instituted a mandate, 50% said they would quit their jobs, according to a survey in June by health policy think tank KFF.
The problem: A higher inoculation rate is exactly what experts say we need to fight the pandemic, and there is pressure on employers to play a bigger role.
The Equal Employment Opportunity Commission said employers have the right to impose a vaccination warrant as long as there are exceptions for employees with health concerns or legitimate religious objections.
It is not known how many employers are taking this step. A June survey by the Society of Human Resource Management showed that 29% of workers say their employers require vaccines. A Gartner survey at the end of July found that only 9% were doing so.
Even among hospitals, most employers do not have a vaccination mandate. The American Hospital Association said only 2,100 hospitals, or about a third of the nation’s total, need vaccines – and many are in places where state laws or ordinances require them.
“Employers in an environment of labor shortage don’t want to create any barriers to employment, let alone any reason for people to go elsewhere,” said Julia Pollak, chief economist at the job site. ZipRecruiter.
Friday: United States Personal Income and Expenditure Data