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Investing.com – Watch Jerome’s speech in the House of Representatives and follow live updates.
In his prepared speech, Powell said the labor market is still a long way from the recovery envisioned by the Fed to start tightening monetary policy. Powell also added that current inflation will remain temporary and end once supply chain bottlenecks from the coronavirus are over and the economy begins to reopen.
“Inflation has risen sharply and will remain at high levels for the next few months before the rate moderates a bit,” said the Fed chairman. Powell said the US Central Bank’s belief that the current price hikes, while worrying, are tied to the economy returning to openness, and time will prove that they are temporary.
Powell added that the labor market “still has a long way to go” to reform, as there are still 7.5 million jobs lost compared to the situation before the pandemic. Powell also added that the hardships of these losses are concentrated on low-paid workers and ethnic minorities, and the turnout remains sharply declining.
Today it has risen to $ 1,830 an ounce in light of the reassurance of Federal Reserve policy and the continued easing of monetary policy. Although the Fed’s bond contracts point to an anticipated rate hike. The US is also down today in light of lower yields.
What’s interesting about the prepared testimony is that the Fed chairman did not comment on the Corona strain outbreak and its impact on economic growth.
Lily:
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Powell talks about allowing the inflation rate to exceed the 2% target to compensate for periods in which it has fallen.
It is also a reminder that the Fed is monitoring the market and will make the decision in time to stop inflation if it seems out of control.
He also says the Monetary Policy Committee is discussing easing policies and says members expect continued improvement in economic conditions. He continues that the bank is aware that its policies affect people’s lives, and the Fed has that in mind.
He adds that the Fed will help protect the economic recovery.
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Powell talks about rising house prices and says the situation is different from the 2008 crisis because the current rise is not the same as the previous bubble.
Powell continues to say that the reasons for the increase range from the desire of individuals to move out of town during the Corona outbreak, as well as rising prices for building materials due to chain bottlenecks. supply.
Powell believes that an increase in the number of homes for sale will ease inflationary pressures on the economy.
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Powell points out that the fiscal stimulus approved by Congress and the White House is playing a role in changing the Federal Reserve’s future vision for the economy. Although the Fed does not control this year, but it does take it into account.
Powell emphasizes that the Fed is only concerned with price stability and access to full employment in the market, but that it does not interfere with financial policy making.
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Powell says the Fed will deal with digital currencies, issue a sovereign digital currency, and Powell sees this as essential for market regulation.
Powell says there will be broad discussions on sovereign digital currency with the public and with government agencies. Powell adds that the Fed is still weighing the risks and rewards for cryptocurrencies.
Powell views stablecoins as unlicensed currencies or funds, in an attack on currencies such as.
Powell does not see that such digital currencies will not become international currencies used for payments, but stablecoins can and therefore should be legalized.
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Powell said the Fed would not surprise the market with a decision to tighten monetary policy. He will provide the market with all due alerts, and Powell has said there will be talks ahead of monetary tightening in two weeks, a nod to Jackson Hole.
In Powell’s opinion, recent inflation data was indeed higher than expected, but consistent with what the Fed expected, as the rise in prices is due to commodities directly affected by the reopening of the economy.
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When will the Fed step in?
Powell is monitoring the situation closely and committing to price stability, and if inflation continues to be higher than expected, and creates the risk of increasing inflation in the long run, the Fed will step in by tightening its policy. monetary.
Powell estimates that the strength of the economy is capable of restoring 3.5%.
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Powell acknowledges that monetary policies are ultra-loose and that the Fed has several options. He thinks that buying bonds is the right decision for the current stage.
Powell believes that accommodative monetary policy is appropriate for the current phase.
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Powell says the dollar is a reserve currency on a global level and has no competitor, and that it will not be able to compete with it, even if it is presented with the digital yuan.
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Powell says there would be no need for digital currencies if the Fed could create a digital dollar.
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Powell notes that inflation is temporary, unless it continues above the Fed’s target year after year. Powell believes that inflation should now rise further, but stresses that this is temporary.
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The Fed is unsure of the stage of inflation, but the general belief is that it will be the most likely scenario.
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