The Fed Still Very Easy – Powell
Tuesday, February 23, 2021 4:32 PM
(ABM FN-Dow Jones) The Federal Reserve will continue its extremely easing policy until the US economy recovers from the Corona crisis. This was confirmed by President Jerome Powell on Tuesday on the first day of his semi-annual monetary policy statement to the US Congress.
“The economy is still far from our targets for employment and inflation,” said Powell, who appeared before the Senate on Tuesday and before the House of Representatives on Wednesday.
Therefore, the Fed will continue to support the US economy with near zero rates and major repurchase programs until “significantly more progress” in the recovery is achieved.
Powell’s statement comes as investors expect a strong economic recovery later in the year and more vaccines against the Coronavirus.
However, the expected recovery is accompanied by a rise in inflation, raising concerns that the Federal Reserve will have to tighten policy reins earlier than expected.
Powell said on Tuesday that inflation was still below the Fed’s long-term target of 2%.
He stressed that if there is a change in the Fed’s policy, it will be informed in due course. Interest concerns have increased recently due to higher bond yields. The 10-year US interest rate was slightly lower on Tuesday afternoon at 1.353%.
Powell was more positive about the economy on Tuesday than his previous testimony in early December, when the United States was experiencing a very high rate of Corona infections and vaccinations had not yet started.
The central bank governor warned in his statement that the path of the economy’s recovery remains very uncertain and that this depends heavily on how the Coronavirus develops.
Wall Street indices began the day trading deep in the red and recovered slightly after the appearance of Powell’s statement. The Nasdaq index fell 1.7 percent and the Standard & Poor’s 0.7 percent. The Dow Jones indexed the damage with a loss of 0.4 percent.
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