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Politics Fed's Powell sees US boom ahead, with COVID still a risk

03:25  12 april  2021
03:25  12 april  2021 Source:   msn.com

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1, 2020, file photo, Federal Reserve Chair Jerome Powell listens during a Senate Banking Committee hearing on Capitol Hill in Washington. During an interview broadcast Sunday, April 11, 2021, on CBS' "60 Minutes," Powell said the U . S . economy is poised for an extended period of strong growth and hiring, though the coronavirus still poses some risk . Powell noted that roughly a million jobs were added in March, when revisions to jobs data in January and February are included. The unemployment rate fell to 6% from 6.2%. Still , there are about 8.4 million fewer jobs than before the pandemic.

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WASHINGTON (AP) — The U.S. economy is poised for an extended period of strong growth and hiring, the chair of the Federal Reserve said in an interview broadcast Sunday, though the coronavirus still poses some risk.

FILE - In this Dec. 1, 2020, file photo, Federal Reserve Chair Jerome Powell listens during a Senate Banking Committee hearing on Capitol Hill in Washington. During an interview broadcast Sunday, April 11, 2021, on CBS' © Provided by Associated Press FILE - In this Dec. 1, 2020, file photo, Federal Reserve Chair Jerome Powell listens during a Senate Banking Committee hearing on Capitol Hill in Washington. During an interview broadcast Sunday, April 11, 2021, on CBS' "60 Minutes," Powell said the U.S. economy is poised for an extended period of strong growth and hiring, though the coronavirus still poses some risk. (Al Drago/The New York Times via AP, Pool, File)

Chair Jerome Powell, speaking to CBS' “60 Minutes," also said that he doesn't expect to raise the Fed's benchmark interest rate, currently pegged at nearly zero, this year. And he downplayed the risk of higher inflation stemming from sharp increases in government spending and expanding budget deficits.

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Jay Powell said the US economy is at an “inflection point” with growth and hiring set to accelerate, but he warned that new surges of Covid -19 could impede the recovery. Speaking on CBS’ s 60 Minutes programme, the chair of the Federal Reserve delivered an upbeat message about the economic outlook and underscored the critical importance of the ongoing vaccinations campaign and the massive stimulus measures enacted to date to maintain its momentum. “ We feel like we 're at a place where the economy' s about to start growing much more quickly and job creation coming in much more quickly

“We feel like we’re at a place where the economy’s about to start growing much more quickly and job creation coming in much more quickly,” Powell said. “This growth that we’re expecting in the second half of this year is going to be very strong. And job creation, I would expect to be very strong.”

In the wide-ranging interview, Powell said that the Fed is closely studying the development of a digital dollar, but hasn't yet made a decision on whether to proceed. Powell said last month that the central bank wouldn't issue a digital currency without approval from Congress.

Powell noted that roughly a million jobs were added in March, when revisions to jobs data in January and February are included. The unemployment rate fell to 6% from 6.2%.

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Still , the Fed chairman emphasized that social distancing and wearing masks will be key to avoiding another spike in cases. “I would identify the principal risk to our economy right now really is that the disease would spread again more quickly,” Powell said. The Fed chairman acknowledged the fallout from the implosion of the Archegos family office, which exposed several large international banks to billions in losses. Powell said the Fed is “monitoring” the event but said the incident appears to have been a risk management breakdown at one firm, as opposed to a system-wide issue.

Fed Chairman Jerome Powell said Thursday that the Fed would be encouraged if the economy extends the 1 million-a-month pace of job gains seen in March. The surge in job gains comes alongside a national vaccine rollout, as the Centers for Disease Control and Prevention reports that 171 million Americans have received at least one dose. The central bank chief said charging ahead on vaccines is key to supporting more job creation as the re-openings continue.

“We would like to see a string of months like that,” he said. “That is certainly in the range of possibility.”

Still, there are about 8.4 million fewer jobs than before the pandemic, and Powell acknowledged that he regularly sees a homeless encampment near the Fed's headquarters in Washington.

“There’s a lot of suffering out there still," he said. "And I think it’s important that, just as a country, we stay and help those people. The economy that we’re going back to is going to be different from the one that we had.”

Powell also said the primary risk to the economy remains the pandemic and a breakdown in precautions that Americans have largely taken for the past year.

The risk ”is that we will reopen too quickly, people will too quickly return to their old practices, and we’ll see another spike in cases,” he said. “The economy should move ahead. But it can move ahead more quickly to the extent we keep the spread of COVID under control.”

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Federal Reserve Chairman Jerome Powell said Wednesday that the Fed is likely to keep its benchmark short-term interest rate unchanged in the coming months, unless the economy shows signs of worsening. But for now, in testimony before a congressional panel, Powell expressed optimism about the U . S . economy and said he expects it will grow at a solid pace, though it still faces risks from slower growth overseas and trade tensions. “Looking ahead , my colleagues and I see a sustained expansion of economic activity, a strong labor market, and inflation near our symmetric 2% objective

Federal Reserve Chair Jerome Powell said the bank wanted to see proof of a more complete recovery before altering its policies, which are focused on stimulating economic activity. "With the Fed keen not to tighten policy until it sees inflation on track to moderately exceed its 2% goal on a sustained basis, and also emphasising that any increase in inflation should be transitory, we expect the Fed will follow through on its commitment not to raise rates for a while yet," said Michael Pearce, senior US economist at Capital Economics.

Separately, House Speaker Nancy Pelosi was asked Sunday whether Powell's bullish comments about the economy meant that additional government support for the economy, such as President Joe Biden's $2.3 trillion infrastructure proposal, was no longer needed.

“No,” Pelosi said. “In fact, if you listen very closely to what he said, we’re at a place where we will ‘begin to see.' ... And then he also cautions against a surge in the virus. If we’re going to grow the economy with confidence, we’ve got to crush the virus."

Powell, on “60 Minutes,” also underscored that the recovery remains highly uneven in the U.S., with the unemployment rate among the lowest-paid one-quarter of Americans still roughly 20%, with the disparity falling especially heavily on African Americans and Hispanics.

The Fed chair also reiterated the central bank’s threshold for raising its short-term rate: a fully healed labor market where nearly everyone who wants a job can find one, inflation at 2% and on track to remain “moderately above 2% for some time.”

Achieving those goals and raising rates this year is “highly unlikely,” Powell said, though he otherwise refused to discuss the timing of a liftoff. Instead, he emphasized that a hike will only come when the employment and inflation conditions are met.

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With the Biden administration's infrastructure plan following the $1.9 trillion rescue package approved by Congress last month, worries about a potential pickup in inflation have grown among some economists. Powell, however, noted that there were large government deficits after the 2008-2009 financial crisis, “and inflation didn't really react to that.”

Powell did say the budget deficit would eventually have to be reduced, but not until the economy has fully rebounded.

“The time to do that is when the economy is strong and we’re fully recovered and people are working and taxes are rolling in,” he said. “The time to do that is not now.”

The Fed chair also said his job is “the same” under Biden as it was under the previous president, Donald Trump. Trump, however, repeatedly criticized and attacked Powell on Twitter, while Biden rarely mentions Powell and said last week that he has not yet spoken to Powell in person. Powell's term as chair ends next year.

“I’m reluctant to comment — even indirectly — on elected politicians,” Powell said. "That’s a practice I’ve kept to and I’ve never regretted it."

Dear Yellen: Saving the planet is not the Fed's job .
The clear implication that the FSOC sees climate change as a financial stability risk puts the Fed in a sticky position. The Fed is still working out its views on the nexus between climate change and financial stability, in view of its technocratic expert macroeconomic judgment and unique insight into big bank balance sheets and planning processes.

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