Jerome Powell Is Confronting a World of Risks to the Fed’s Taper Timeline
Bloomberg Economics modeling shows how shocks at home and abroad could derail the U.S. recovery and force a course correction from the Fed.
Uncertainty is pulling the Fed away from its carefully calibrated path to U.S. recovery.
Photographer: Stefani Reynolds/BloombergWhat would it take to knock the U.S. recovery off course and send Federal Reserve policy makers back to the drawing board? Not much — and there are plenty of candidates to deliver the blow.
From one direction: U.S. debt-ceiling deadlock, China property slump or simply an extension of Covid caution could hit growth and jobs — taking the Fed’s proposed taper of bond purchases off autopilot, and pushing its first interest-rate increase back to 2024 or later. From the other: Sustained supply-chain snarl-ups could keep inflation stubbornly high and unmoor inflation expectations — forcing an acceleration of the taper, and an early rate liftoff in 2022.