Federal Reserve Board Chair Jerome Powell said Wednesday that the central bank has not finished its job of bringing the economy back to a healthy state. This is a dovish signal that super-simple monetary policy will be implemented in the coming months.
Powell told reporters after the Federal Open Market Committee decided to stabilize monetary policy, but the economic sector, already damaged by the coronavirus pandemic, is experiencing new pain. Said.
“We haven’t beat this yet,” Powell said.
“The pace of economic activity and employment recovery has slowed in recent months, focusing weaknesses on the sectors most affected by the pandemic,” the Federal Reserve Board of Governance’s Interest Rate Commission said in a statement. “.
Powell repeatedly emphasized that it is too early for the US central bank to consider breaking out of its accommodative monetary policy stance. He said the new stock of COVID-19 would add to economic uncertainty.
In the wake of the pandemic, the Fed is buying $ 120 billion a month in US Treasuries and mortgage-backed securities to help lower the policy rate to near zero and help the economy recover from the pandemic.
Powell said the Fed can do more to support the economy as needed.
“Growth is slow, but not slow enough to take action,” said Ian Shepherdson, chief economist at Pantheon Macroenomics.
Central banks are trying to convince the market not to reverse the course until the economy recovers. First, early last year, the central bank adopted a policy framework stating that it would not raise interest rates during the first period of inflation.
And at the final meeting in December, the Fed said it would keep buying until “substantial further progress” was seen on the two goals of low unemployment and stable 2% inflation. Fed watchers believe this means that the Fed will begin delaying asset purchases until 2022 and will probably not raise interest rates until a year later.
Some Fed local presidents have suggested that if the economy improves, it could begin to taper off this year.
Powell said the Fed will be a “patient” this year if consumer prices soar as a result of the economy returning to stronger health. Rising inflation will be welcomed.
“We’re far more worried about losing people’s careers because they’re not fully recovering,” Powell said, rather than inflation.
“Low inflation gives the FOMC ample room to maintain easing,” said Mike Ferroli, US Chief Economist at JPMorgan Chase, before the meeting.
Perhaps the Fed will not face pressure to change policy until September, when investors and central banks begin to get a clearer picture of the 2022 outlook.
Until then, this action could be financial, and US Treasury Secretary Janet Yellen is now in Congress.
Powell said he was “absolutely confident” to build a good partnership with Yellen.
Analysts expect it to shrink before it passes, but the new Treasury will try to shepherd President Joe Biden’s proposed $ 1.9 billion financial relief package through Congress. ..
At this point, economists believe the economy is weak in the short term, but expect growth to skyrocket as winter ends and more Americans are vaccinated against the coronavirus.
Powell also said he saw signs of improving outlook later this year.
The burning question of the day from the reporter was about Recent volatility of the stock market due to Reddit chat groups And other internet forums. Powell declined to comment directly, saying the widespread financial stability risk was moderate.
The Federal Reserve Board recognizes that this low interest rate environment poses potential financial stability risks.
Yield of 10-year government bond
Stock prices plummeted, dropping nearly 1% on Wednesday.Dow Jones Industrial Average
Trading on Wednesday fell 634 points (2%).
“We haven’t beat this yet,” says Fed’s Powell, signaling to keep policy super-easy.
http://www.marketwatch.com/news/story.asp?guid=%7B21005575-02D4-D4B5-4572-D231D9F32F50%7D&siteid=rss&rss=1 “We haven’t beat this yet,” says Fed’s Powell, signaling to keep policy super-easy.