OK, well, certainly some recognition that the economic recovery is continuing. Interestingly, the statement did take out reference to the fact that COVID cases were coming down, obviously, because that's no longer happening. So they didn't say anything in the statement itself about the potential implications on the economy of that. But at least recognized that we're no longer in a world where we're COVID cases are coming down. Certainly wouldn't call that, I wouldn't call that hawkish. On the other hand, they also recognize that while sectors that are most impacted by the virus have been improving, continue to make progress, they still haven't yet made a full recovery. Perhaps the most hawkish thing in the statement, though, was this a recognition that they started asset purchases in order to make progress toward their goals of maximum employment and price stability. And they now have said we've seen continued progress. We're going to continue to assess that situation. So sort of hinting that they're at least talking about tapering. Of course, you remember the Fed chair saying they would be talking about talking about tapering, well they're now talking about it and giving hints that that will be the next stage for monetary policy in the United States.
And James, I want to talk a little bit about inflation, because the Fed still maintains or continues to believe that inflation is transitory and they point to examples like lumber, for example, which has come down from record highs. So do you agree with the statement? What are your thoughts?
Sure. Well, certainly you see that on the supply side of things. And you can see this in a range of commodities, but also just in the issues in the auto sector with respect to supply issues. And that there are pandemic related supply constraints that should be transitory, that are weighing on production, that should dissipate as we move further away from the pandemic. At the same time, a demand has been very strong for goods due to the double whammy of monetary policy going to zero, interest rates coming down, and of course, all the various fiscal programs. So I think at this stage, you know, inflation is both demand and supply driven. The supply challenges may dissipate, but the challenge will be if the economy is still sort of operating in a state of excess demand, that will eventually require the Fed to act. And we can talk about some of these transitory factors, but it doesn't escape from the reality that if the economy's running hot, that would tend to put upward pressure on prices. And monetary policy will eventually have to respond to that.
And James, as you mentioned earlier, there's more talk about tapering from the Fed of their bond buying program. Do you see that happening this year?
Well, I definitely think we're going to hear some more guidance on tapering. I don't know, I think it will be sometime either very late in the year or early next year when they actually start that process. But we will hear more communication. In fact, the Fed chair speaking now, I suspect is going to be asked about it and and will have to speak about the conversations that were happening among Fed members on tapering. And then in August, they have the Jackson Hole summit at the very end of the month. That's typically a time when the Fed has used to sort of have a more fulsome discussion about things like this and about major sort of transitions in policy. And I would think that even by September, it's quite possible that we get some additional guidance on when that may occur. I think they're going to try to be very forward looking in terms of saying, if this is coming, they're never going to surprise financial markets. They don't want to do what happened with the taper tantrum in 2014. But I definitely think we're going to hear increased communication on the subject and an eventual start to tapering probably near the end of this year.
I think one of the highlights of the Fed statement is that they're saying that the economy is making progress towards a goal on inflation and employment. What do you see as some of the risks to the Fed's outlook?
Well, certainly in the near term, the rise in cases, especially driven by this more contagious Delta variant we've seen in some other countries, that, again, this poses challenges is not only on the demand side of the economy, but we have people that can't go to work because they've been exposed. And we already have seen these challenges to hiring. And really what's lacking is the labor market recovery. So any impediments to that, both in terms of potential supply, especially in terms of potential supply of labor, is something that is a risk to the recovery. And, of course, you know, the Fed doesn't have a lot of tools for dealing with that. So, I mean, that's that's, I think, where their conundrum will be. And if we continue to see inflation elevated and supply challenges not mitigated because of the ongoing pandemic, eventually policy still has to move towards normalization. So that, I think, is where the risks lie, both for the economy and for financial markets.
Finally, where do you see the US dollar going in the next little while?
Well, I think in the near term it's come up quite quickly. We could see a little bit of a depreciation. We have that toward the end of this year. I think beyond that, if we're talking about relative to the loonie at least, we would see a move back, somewhere around where we are today. I mean, we don't have major swings in the currency from here, having it landing right around that sort of 80 cent mark where we think is about where it should be.
James, thank you very much for your time.
You're welcome. Thanks, Anthony.