The US Federal Reserve Chair, Jerome Powell has intimated that the United States’ economic recovery remains “uneven and far from complete” and it will be “some time” before the Federal Reserve considers changing policies it adopted to help the country back to full employment.
Addressing the Senate Banking Committee on the state of the economy, Powell said the US central bank’s interest rate cuts and purchases of $120bn in monthly government bonds “have materially eased financial conditions and are providing substantial support to the economy.
“The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved.
“While the coronavirus health crisis in the country is improving and ongoing vaccinations offer hope for a return to more normal conditions later this year, the path of the economy continues to depend significantly on the course of the virus and the measures taken to control its spread.”
Fed Chair, Jerome Powell
As the Federal Reserve Chair, Powell is mandated to appear before the Senate Banking Committee twice every year at Capitol Hill. This also marks his first meeting with legislators since Democrats won the White House and control of both chambers of Congress.
Meanwhile, the growing likelihood that Congress will pass President Joe Biden’s $1.9 trillion stimulus plan has raised concerns about a possible spike in inflation and overheating in asset markets. Powell however downplayed concerns about rising longer-term interest rates and potentially higher inflation.
He acknowledged the potential for a healthier economy but stressed on the personal hardships caused by the pandemic, especially for unemployed Americans.
“As with overall economic activity, the pace of improvement in the labour market has slowed. Although there has been much progress in the labour market since the spring, millions of Americans remain out of work.”
The Federal Reserve had earlier pledged to keep interest rates low and use other monetary policy tools to speed up a labour market recovery. It cut its benchmark short-term interest rate to nearly zero last March in response to the pandemic recession. It is also purchasing $120 billion a month in bonds in an effort to hold down longer-term rates.
“The economy may improve rapidly later this year, but the job is not done yet, the job is not done.”
Quizzed about President Joe Biden’s $1.9 trillion relief package, the Fed chair refused to endorse or condemn it. When asked by Sen. John Kennedy, R-La., if he would “be cool” with Congress approving or voting down Biden’s proposal, Powell said, “By either being cool or uncool, I would have to be expressing an opinion. … which I’m not doing.”
Powell is also expected to appear before the House of Representatives Committee on Financial Services later on Wednesday, 24th February 2021.
His four year-team as Fed Chief expires early next year and President Biden will have to decide in the coming months whether to reappoint Powell, who was chosen for the job by former President Donald Trump. The nomination is subject to Senate ratification.
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