Home Business Powell praises economic recovery, sees eventual Fed pull back in help

Powell praises economic recovery, sees eventual Fed pull back in help

by MD Samsuzzaman Siyam

Federal Reserve Chair Jerome Powell prepares for a House Financial Services Committee hearing on “Oversight of the Treasury Department’s and Federal Reserve’s Pandemic Response” in the Rayburn House Office Building in Washington, D.C. on Dec. 2, 2020.

Jim Lo Scalzo | Reuters

Powerful fiscal help from Congress combined with accelerated vaccine distribution has allowed the U.S. economy to recover faster than expected, Federal Reserve Chairman Jerome Powell said Thursday.

At some point, that will allow the central bank to dial back the help it has provided, though he said now is not that time.

“As we make substantial further progress toward our goals, we’ll gradually roll back the amount of Treasurys and mortgage-backed securities we’ve bought,” Powell told NPR’s “Morning Edition” in a live interview. “We will very gradually over time and with great transparency, when the economy has all but fully recovered, we will be pulling back the support that we provided during emergency times.”

U.S. stock market futures edged a bit lower after Powell spoke and continued negative after the open.

In the wake of Covid-19 lockdowns just over a year ago, the Fed cut benchmark short-term borrowing rates to near zero and has been buying at least $120 billion of bonds each month.

Powell and other Fed officials have pledged to keep that accommodation in place until the economy reaches full employment and inflation is averaging around 2%. He said the U.S. has made strides in getting to those goals.

“In a nutshell, it’s a combination of better developments on Covid, particularly the vaccines, and also economic support from Congress. That’s really what’s driving it,” he said. “That’s going to enable us to reopen the economy sooner than might have been expected.”

The U.S. has been vaccinating close to 2.5 million people per day, and hospitalization and death rates have been generally coming down even though case loads have plateaued or are gradually rising in some states.

Congress has approved more than $4 trillion in stimulus over the past year and is looking at possibly another $3 trillion in future spending.

Powell called the current fiscal practices “unsustainable” though necessary in the face of the crisis. Low interest rates are allowing the U.S. to shoulder the debt load without causing too much hardship, though Congress eventually will have to address the debt issue, he said.

“We will need to do that, but that time is not now,” Powell said.

Looking back over the past year, he said he has no regrets about the extraordinary measures the Fed took even as some critics worry that the amount of fiscal and monetary stimulus could prove troublesome later if the economy overheats.

“Ultimately, in a crisis I think what we did served its purpose in staving off what could have been far worse outcomes,” Powell said.

Source by [author_name]

You may also like

Leave a Comment

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More

Privacy Policy