Breaking News
Ad-Free Version. Subscribe now to follow markets, faster and distraction-free. Upgrade now
0
Ad-Free Version. Subscribe now to follow markets, faster and distraction-free. More details

Powell says economy still needs Fed support, markets not driven by loose money

EconomyFeb 23, 2021 11:54
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Chairman of the Federal Reserve Jerome Powell listens during a Senate Banking Committee hearing in Washington

By Howard Schneider

WASHINGTON (Reuters) - Federal Reserve Chair Jerome Powell on Tuesday pushed back on suggestions that U.S. central bank support for the economy risked inflating a dangerous asset bubble, insisting the support was still needed and that investors were responding mostly to expectations for a successful recovery.

From the anticipated success of coronavirus vaccines to the large stash of savings available for households to spend in coming months, "there are many factors that are contributing to what is happening in markets right now," Powell said in a hearing before the Senate Banking Committee. "Monetary policy I would certainly agree is one of them," but still needs to be deployed to support the economy until it is more fully healed.

Interest rates will remain low and the Fed's bond purchases will continue "at least at the current pace until we make substantial further progress towards our goals ... which we have not really been making," Powell said in the hearing, his first since Democrats won the White House and control of both chambers of Congress.

The Fed chief was responding to questions from Republican senators concerned that the combination of Fed asset purchases, a potential vaccine-driven economic boom, and passage of another massive stimulus package may drive asset prices to unsustainable levels and spark inflation.

"Be it GameStop (NYSE:GME), Bitcoin, real estate, commodities, we are seeing quite elevated asset prices and signs of inflation," said Republican Senator Pat Toomey, who is among those arguing that the Biden administration's proposed $1.9 trillion spending plan should be tailored.

"There are a lot of warning signs that are blinking yellow," Toomey said.

Powell, however, said the focus needed to remain on an economic recovery that is "uneven and far from complete," and would need the central bank's help for "some time" to get back to full employment.

The Fed's interest rate cuts and monthly purchases of $120 billion of government bonds "have materially eased financial conditions and are providing substantial support to the economy," Powell said in his opening remarks to the committee.

"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," the hurdle the Fed has set for discussing when it might be appropriate to pare back support.

Even with Americans being vaccinated at a rate of more than 1.5 million a day and coronavirus caseloads dropping, Powell and his fellow Fed policymakers are focused on the nearly 10 million jobs missing from the economy compared to a year ago, and the potent risks still posed by the virus, which has killed more than half a million people in the United States.

While the health crisis in the country is improving and "ongoing vaccinations offer hope for a return to more normal conditions later this year," Powell said, "the path of the economy continues to depend significantly on the course of the virus and the measures taken to control its spread."

Powell will testify before the House of Representatives Financial Services Committee on Wednesday as part of his mandated twice-a-year appearances on Capitol Hill to provide lawmakers with an update on the economy.

Powell says economy still needs Fed support, markets not driven by loose money
 

Related Articles

Asian shares perk up as calmer bonds ease jitters
Asian shares perk up as calmer bonds ease jitters By Reuters - Mar 01, 2021

By Julie Zhu and Koh Gui Qing HONG KONG/NEW YORK (Reuters) - Asia extended the global rally in stocks on Tuesday as a halt in a recent bond markets sell-off eased investor nerves...

Asian shares perk up as calmer bonds ease jitters
Asian shares perk up as calmer bonds ease jitters By Reuters - Mar 01, 2021

By Julie Zhu and Koh Gui Qing HONG KONG/NEW YORK (Reuters) - Asia extended the global rally in stocks on Tuesday as a halt in a recent bond markets sell-off eased investor nerves...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
George Thorm
George Thorm Feb 23, 2021 13:26
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Would like to know what Powell’s been smoking
Daniel Chiarelli
Daniel Chiarelli Feb 23, 2021 13:26
Saved. See Saved Items.
This comment has already been saved in your Saved Items
was literally thinking the same thing
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email