Supporting the economy is still necessary


US Federal Reserve Chairman Jerome Powell considered that economic support is still required, indicating that investors mostly respond to expectations of a successful recovery.

In a hearing before the Senate Banking Committee, Powell voiced his rejection of suggestions that the Fed’s support for the economy threatens “to inflate a dangerous asset bubble.”

He said: “From the expected success of Coronavirus vaccines to the large stock of savings available to families to spend in the coming months, there are many factors that contribute to what is happening in the markets at the present time, and I certainly agree that monetary policy is one of them, but it is still necessary. Use it to support the economy until it fully recovers. ”

He added, “Interest rates will remain low and bond purchases by the Federal Reserve will continue, at least at the current pace until we achieve greater progress towards our goals, which we have not actually achieved.”

Powell considered that “the recovery of the US economy is still uneven and far from complete,” and it will take some time before the Reserve Board considers changing the policies it adopted to help the country return to full employment.

He continued: “The US central bank cuts interest rates and purchases of monthly government bonds amounting to 120 billion dollars tangibly ease the severity of financial conditions and provide significant support to the economy.”

Powell was responding to questions from Republicans in the Senate who were concerned that the combination of the Fed’s asset purchases, a potential economic recovery driven by progress in giving vaccines, and passing another massive stimulus package, might push asset prices to unsustainable levels and lead to inflation.

Source: “Reuters”


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