Powell testimony adjusts timing of taper, not long-term rate outlook

Fed Chair Jerome Powell testified before Congress on Tuesday alongside Treasury Secretary Janet Yellen, and markets were listening. While many topics were discussed, the markets responded most to Powell’s indication that the Fed may speed up the recently announced tapering plan for the huge bond buying program (“QE”) that has been in place since March of last year. The initial plan for $15 billion/month reductions in bond buying would have brought the process to a close by June of next year, while a faster pace could do so by March. Markets also focused on Powell’s comment that the word “transitory” may no longer be applicable with regard to inflation: “it might be time to retire that word (‘transitory’) and try to explain more clearly what we mean.”