Powell on Policy Lags and Question of Raising Rates Before Taper End

Q: Why continue buying assets now even at a lower pace, given monetary policy impact with lags?

• A: Powell says "we've learned that in dealing with balance sheet issues that it's best to take a careful sort of methodical approach to make adjustments. Markets can be sensitive to it, and we thought this was a doubling of the speed, we're basically two meetings away now from finishing the taper and we thought that was the appropriate way to go."
• Re mon pol working with lags - "conditions can change very quickly and my own sense is that they get into conditions that affect the economy fairly rapidly, shorter [sic] than the traditional thought of a year or 18 months". Notes that markets move immediately when the Fed communicates what they're going to do - they change on the expectation of things happening.
• Re a follow up question about raising rates before the taper: Says "the sense of that of course being that buying assets is adding accommodation, and raising rates is removing accommodation. Since we're two meetings away from completing the taper, assuming things go as expected, I think if we wanted to lift off before then, then you would stop the taper potentially sooner, but it's not something I expect to happen. But I do not think it would be appropriate and we don't find ourselves in a situation where we might have to raise rates while we're still purchasing assets."