2nd LD: U.S. Fed signals tapering could start soon despite Delta variant uncertainty

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WASHINGTON, Sept. 22 (Xinhua) -- The U.S. Federal Reserve on Wednesday kept its benchmark interest rate unchanged at the record-low level of near zero, while signaling that the central bank may begin tapering asset purchases soon despite the Delta variant increasing economic uncertainty.

The Fed has pledged to continue its asset purchase program at least at the current pace of 120 billion U.S. dollars per month until "substantial further progress" has been made on employment and inflation since last December.

"Since then, the economy has made progress toward these goals. If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted," the Federal Open Market Committee (FOMC), the Fed's policy-making committee, said in a statement after a two-day meeting.

"The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals," the statement said.

At a virtual press conference Wednesday afternoon, Fed Chair Jerome Powell said that the sectors most adversely affected by the pandemic improved in recent months, but the rise in COVID-19 cases slowed recovery.

"The Delta variant led to significant increases in COVID-19 cases resulting in significant hardship and loss and slowing the economic recovery. Continued progress on vaccinations would help contain the virus and support a return more normal economic conditions," he said.

Powell also said that Fed officials downgraded their forecasts for U.S. economic growth this year compared with three months ago, "partly reflecting the effect of the virus".

The U.S. economy is expected to expand at 5.9 percent this year, lower than 7 percent estimated in June, according to the median forecast of the Fed's latest summary of economic projections released Wednesday.

The median estimate of inflation at the end of this year, measured by annual growth in the personal consumption expenditures (PCE) index, rose to 4.2 percent from 3.4 percent in June.

"This sets the stage for the Fed to formally announce tapering plans in November and the first reduction to occur in December, which is our baseline forecast assumption," Ryan Sweet, a senior director at Moody's Analytics, said Wednesday in an analysis. Enditem

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