Feb. 23 – Federal Reserve Chair Jerome Powell said Tuesday in Congress to give lawmakers and the public an update on the state of the U.S. economy, that there is a lot of economic confidence right now and offered a mostly positive image of things to come.Powell appeared before the banking committee of the Senate to present a semi-annual Fed monetary policy survey, which is an effective short-term evaluation of the domestic economy.
The Fed chairperson appears twice each year in Congress to deliver the update.Sometimes, the semi-annual updates do not attract much attention, but economists paid more interest to the update this week primarily because of signs that could suggest trouble on the horizon—notably, a rise in yields and inflation of Treasury bonds.By the end of last week, the 5-year government bond has increased by almost a quarter-point, the 10-year bond yield has also risen dramatically and this year the 30-year note has increased to 2.14 percent by almost a half-point.Usually,
that bond yields are positive signs, but there is concern that they may also mean that faster than the market warrants, the Fed wants to tighten policy. Powell didn’t sound too worried Tuesday. “In a way, it’s a statement of confidence on the part of the market that we will have a robust and ultimately complete recovery,” he said.”There is still a long way to go to full recovery and we intend to keep our policy supportive of that recovery.”
He sounded a calm note again on the subject of inflation. “We have averaged less than 2 percent inflation for more than the last 25 years,” he said.Powell has previously said that the dangers of rampant inflation are much more reasonable than the pitfalls that could result from economic support being too cautious.When questioned if the central bank backed President Joe Biden’s $1.9 trillion American Rescue Package, which is scheduled to be approved by the House later this week, Powell was less definite.
At one point, Sen. John Kennedy, R-La., asked him if the proposal was “cool”I think that I would have to express an opinion by being either cool or uncool,”I think that by being either cool or uncool, I would have to be expressing an opinion,” “We will need to get back on a sustainable fiscal path. The way that has worked when it’s successful is you just get the economy growing faster than the debt. … That has to happen.”In addition to other responsive emergency measures, the Federal Reserve under Powell cut main interest rates to near zero for much of the COVID-19 period.
The last time Powell appeared to update Congress, last June, he said that once the global health crisis is under control, the U.S. economy could not recover, adding that there was “significant uncertainty” about how long it will take.Much has improved, however, since Powell’s last update—most importantly, tens of millions have received the COVID-19 vaccine in the United States and cases of coronavirus have been on the decline nationally since mid-January.
These are two factors that are a big factor in the national image of labor.Ahead of and during Powell’s testimony, U.S. markets sagged. Earlier in the day, the Dow Jones Industrial Average was down about 360 points, while the S&P was down about 30 and the Nasdaq composite had fell nearly 300 points. However, after his remarks, the markets erased losses as the Dow increased 0.05 percent, the S&P 500 added 0.13 percent and the Nasdaq Composite declined 0.5 percent.Powell will present the Fed policy report and testify on Wednesday afternoon before the House Financial Services Committee.