Powell Admits Fed's QE Ended Too Late

Federal Reserve Chair Jerome Powell acknowledged on Tuesday that the central bank could have ended its quantitative easing (QE) program earlier than it did. In a speech at the Economic Club of Washington, Powell said that in retrospect, the Fed could have likely ended QE earlier, given the strength of the economic recovery.

Powell's remarks come as the Fed continues to unwind its massive balance sheet, which expanded significantly during the COVID-19 pandemic to support the economy. The Fed has been reducing its monthly asset purchases since last year and is expected to continue doing so until its balance sheet reaches a more sustainable level.

The Fed's QE program involved purchasing large quantities of government bonds and mortgage-backed securities to lower long-term interest rates and stimulate economic growth. The program was launched in response to the 2008 financial crisis and was expanded during the pandemic to provide additional support to the economy.

Powell's comments suggest that the Fed may have been too cautious in ending its QE program, given the strength of the economic recovery. However, he also noted that the Fed's actions were based on the best available information at the time and that the central bank had to balance the risks of acting too quickly or too slowly.

The Fed's QE program has been a controversial topic among economists and policymakers. Some argue that the program has been effective in supporting the economy and preventing a deeper recession, while others contend that it has contributed to asset price bubbles and income inequality.

Powell's remarks come as the Fed continues to grapple with the challenges of managing the economy in an uncertain and rapidly changing world. The central bank is facing a delicate balancing act between supporting economic growth and controlling inflation, which has been rising in recent months.

The Fed's next policy meeting is scheduled for March 22-23, where it is expected to provide further guidance on its monetary policy stance. Investors and economists will be closely watching the Fed's actions to gauge the direction of the economy and the potential impact on financial markets.