Fed Reserve Chief Focuses on Economic Need at Critical Moment in Markets

Fed Reserve Chief Focuses on Economic Need at Critical Moment in Markets

The Federal Reserve chair, Jerome H. Powell, has stated that the apex bank will continue supporting the economy even as experts express concern about inflation. Powell made this known while addressing lawmakers, stating that the economic outlook remains wildly uncertain and reiterating the importance of the central bank continuing its efforts to support the economy.

Mr. Powell declined to talk about the spending plans. However, he pushed back on the perception that the economy is on the cusp of running too hot and staring inflation in the eyes.

The economic recovery remains uneven and far from complete, and the path ahead is highly uncertain,” Mr. Powell said. “There is a long way to go.”

The Fed is reportedly planning to encourage lending and spending by holding interest rates near zero to bolster growth. In a related development, the central bank plans to continue buying large quantities of bonds to keep money pumping through the financial system, even as investors are becoming concerned the Fed might slow those bond purchases if inflation begins to rise.

The sentiment of worried investors is palpable in the capital market, driving down stocks for five consecutive days. On the other hand, interest rates on longer-term government debt have been climbing, hitting their highest point in a year this week.

We’re in one of these market mania moments in which there’s an intense focus on inflation,” and “he was very sanguine, very calm,” said Julia Coronado, founder of MacroPolicy Perspectives and a former Fed economist. “He kept turning attention back to the labor market.”

Mr. Powell also reiterated the Fed’s plans to continue buying bonds until it sees “substantial further progress” toward its goals of full employment and stable inflation. According to him, America can “expect us to move carefully, and patiently, and with a lot of advance warning” when it comes to slowing that support.

While joblessness has reduced significantly after the surge in 2020, the official unemployment rate remains nearly double its February 2020 level, with members of minority groups seemingly feeling the brunt harder. 

Concerning inflation, Powell expressed his optimism, saying that longer-running inflation trends do not “change on a dime” and that the Fed has the tools to fight rising prices.

“I really do not expect that we’ll be in a situation where inflation rises to troubling levels,” Mr. Powell said. “This is not a problem for this time, as near as I can figure.”

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