LIVE: Fed Chairman Jerome Powell Speaks on Post-Pandemic Monetary Policy — 11/03/21, 2:30PM ET

Stocks have started to climb as Powell’s press conference continues. The Dow is up 77 points, while the S&P 500 is up 0.5% while the Nasdaq Composite leads with a gain of 0.8%.

-Jesse Pound

Fed Chair Jerome Powell said at a press conference that current elevated prices in the U.S. are not caused by a tight labor supply.

“The inflation that we’re seeing is really not due to a tight labor market. It’s due to bottlenecks and it’s due to shortages and it’s due to very strong demand meeting those,” Powell said.

Regarding a rise in wages as companies struggle to fill open job positions, Powell does not see signs of a wage-price spiral, when prices rise as a result of higher wages.

“We don’t see troubling increases in wages, and we don’t expect those to emerge,” Powell said.

— Hannah Miao

Federal Reserve Jerome Powell said there’s further ground to cover before reaching maximum employment, one of the policy goals of the central bank and a major hurdle before raising rates.

The focus of this week’s meeting isn’t on raising rates, but on tapering, he added.

“It is time to taper we think because the economy has achieved substantial further progress toward our goals measured for last December,” Powell said. “We don’t think it’s time yet to raise interest rates. There is still ground to cover to reach maximum employment both in terms of employment and terms of participation.”

— Tanaya Macheel

“Our decision today to begin tapering our asset purchases does not imply any direct signal regarding our interest rate policy. We continue to articulate a different and more stringent test for the economic conditions that would need to be met before raising the federal funds rate,” Federal Reserve Chairman Jerome Powell said his post-meeting news conference Wednesday afternoon.

-Rich Mendez

Powell clarified that the rate of the Fed taper could change in either direction after December.

“We are prepared to speed up or slow down” the asset purchase changes, he said.

-Jesse Pound

Federal Reserve Jerome Powell said it’s very difficult to gauge when the supply chain constraints will resolve themselves.

“Of course it is very difficult to predict the persistence of the supply chain constraints or their effects on inflation. Global supply chains are complex. They will return to normal function but the timing of that is highly uncertain,” the central bank chief said in a press conference.

Powell said the Fed will use its tools to fight inflation if price pressures stay higher for longer.

“If we were to see signs of the path of inflation, or longer-term inflation expectations, was moving materially and persistently beyond levels constant with our goals, we will use our tools to preserve price stability,” Powell said.

— Yun Li

“I think the Federal Reserve is behind the curve. They are starting to reduce the taper a little bit. There shouldn’t be any purchase of mortgage bank securities in this booming housing market and the U.S. government doesn’t need any support either. So the Fed is behind the curve, I’m glad they finally did what they [did],” former Fed governor Robert Heller told CNBC’s “Power Lunch.”

“I would reduce the asset purchases very quickly, within two months or something like that — have it down to zero, and the policy rate I would start to lift right at the beginning of the year to get it back to a normal policy stance,” Heller said.

-Rich Mendez

“There remains quite a disconnect between the reality that I see and what I believe most Americans are experiencing, both households and businesses and what the Fed sees to the point that it seems like the September FOMC statement was not updated for today,” said Peter Boockvar of Bleakley Advisory Group.

-Jesse Pound

Fed Chair Jerome Powell has taken the stage to start his press conference. The S&P 500 is up by 0.1%, and the 10-year Treasury yield is trading just below 1.6%.

-Jesse Pound

“I don’t expect a rate hike in July or in September, what I think they’re trying to do is draw space between when they’re done with tapering (and) when they start tightening because they’ve always tried to say these are two distinct things,” said David Kelly, chief global strategist of J.P. Morgan Asset Management.

“I think this means that they’re going to wait until the last meeting of 2022 just like they did in the last decade … to actually put in rate hikes.”

-Rich Mendez

The 10-year Treasury yield has picked up steam as investors digest the Fed statement. The benchmark yield climbed to 1.6% after trading near 1.56% prior to 2 p.m.

-Jesse Pound

“The fact they continue to describe inflation as transitory suggests they’re going to continue to stay lower for longer than many are anticipating,” said Michael Arone of State Street Global Advisors.

-Patti Domm

The Federal Reserve’s policy statement maintained its ‘transitory’ language regarding inflation. Some investors and strategists had speculated that the central bank would drop that language as inflation has remained high.

“Inflation is elevated, largely reflecting factors that are expected to be transitory. Supply and demand imbalances related to the pandemic and the reopening of the economy have contributed to sizable price increases in some sectors,” the statement said.

The language around inflation does differ slightly from prior statements. See how the statement changed this month here.

-Jesse Pound

The equity and fixed income markets showed little initial movement after the Federal Reserve’s policy statement was released. The S&P 500 was little changed, while the 10-year Treasury rate moved slightly higher to 1.572%.

-Jesse Pound

The Federal Reserve revealed its plan to slow its asset purchases starting later this month. The central bank will decrease the current purchases by $15 billion per month in November and December, and said it would likely follow a similar path in the months ahead. The Fed currently has been making roughly $120 billion in purchases per months.

The Fed instituted the asset purchases in March 2020 in attempt to stabilize credit markets during the pandemic-sparked market sell-off. The Fed has kept the purchases steady, ballooning its balance sheet to historic levels, even as the economy has begun to recovery and the markets have stabilized.

-Jesse Pound

The equity markets were relatively calm but mixed shortly before the Fed’s policy announcement at 2 p.m. ET.

The Dow Jones Industrial Average was down 140 points, or 0.4%, while the S&P 500 was off by a modest 0.1%. The tech-heavy Nasdaq Composite was up slightly.

On the fixed income side, the yield on the 10-year Treasury bond was up about 2 basis points for the day at 1.565%. However, the benchmark rate is still well below its recent highs from last month. Yields move inverse of prices, and a basis point is equal to 0.01%.

-Jesse Pound

Bond markets appear to be pricing in the first rate hike as soon as June, but one of Wall Street’s top fixed income investors said the Fed might hold off a few more months.

BlackRock’s Rick Rieder said Monday that he thinks the central bank could do its first rate hike in September.

“I think the market has probably overshot on the amount they are going to do, but I think they are going to raise rates one to two times next year,” Rieder said.

-Jesse Pound, Patti Domm

The Federal Reserve is widely expected to announce its plan to taper asset purchase on Wednesday, with many market watchers saying the monthly purchases should end completely by the middle of 2022.

Investors will be dialed in for clues on the rest of the Fed’s post-crisis plans, including rate hikes and changing language around inflation from Fed Chair Jerome Powell. In recent months, expectations for rate hikes next year have risen sharply while inflation has remained elevated.

“He needs to note that there are risks on both sides. Of course, there are risks that the inflation we’ve seen proves more persistent than they hoped,” said Bill English, a former senior Fed advisor and now a professor at the Yale School of Management. “I’d like to hear him say there are downside risks. Fiscal policy is tightening a lot.”

-Jesse Pound, Jeff Cox