Powell Acknowledges Fed's Mistake in Covid-Era QE
Federal Reserve Chair Jerome Powell has acknowledged that the central bank may have made a mistake by not ending its large-scale asset purchases sooner during the pandemic.
The Fed likely "should have stopped" sooner,
Powell said while speaking at the National Association for Business Economics conference. He specifically pointed to mortgage-backed securities (MBS) purchases, which some market watchers had questioned during the pandemic recovery.
- The Fed's purchase of MBS and U.S. Treasury securities was intended to avoid a sharp tightening of financial conditions.
- Powell acknowledged previous skepticism around the central bank's actions, but stopped short of admitting that MBS purchases contributed to housing disparities.
Powell's reflection on the central bank's aggressive asset purchases during the COVID-19 pandemic suggests that the Fed may have overreacted.
Author's summary: Powell admits Fed's potential mistake in Covid-era QE.