Powell Says Fed Could Start Scaling Back Stimulus This Year

Federal Reserve Chairman Jerome Powell reaffirmed the central bank’s emerging plan to begin reversing its easy-money policies later this year while explaining in greater detail why he expects a recent surge in inflation to fade over time.

At the Fed’s meeting late last month, “I was of the view, as were most participants, that if the economy evolved broadly as anticipated, it could be appropriate to start reducing the pace” of the Fed’s $120 billion in monthly asset purchases this year, Mr. Powell said Friday.

Since that meeting, the economy has seen “more progress in the form of a strong employment report for July, but also the further spread of the Delta variant” of the Covid-19 virus, Mr. Powell said Friday morning at a virtual symposium hosted by the Kansas City Fed.

The rise of Covid-19 infections due to the Delta variant has complicated the economic outlook by creating renewed risk of a sharper economic slowdown at the very moment some officials were ready to reduce, or taper, the pace of monthly bond purchases.

Growth in consumer spending slowed last month to 0.3%, the Commerce Department reported on Friday, less than a third of June’s spending increase of 1.1% and less than economists had projected. Spending on services grew while spending on goods declined.