Fed’s Powell ‘Doesn’t Blink’ And 5 Other Things We Learned From His Press Conference

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Perhaps the most important takeaway from Fed Chairman Jerome Powell’s press conference on Wednesday is how committed he is to keeping his foot on the gas even as the economy is ready to grow. “I just don’t see why anyone doubts the Fed’s commitment to its strategy. They are all inside. Powell just doesn’t blink, ”tweeted Ian Shepherdson, chief economist at Pantheon Macroeconomics.

“While the recovery has progressed faster than expected overall, it remains uneven and far from complete,” Powell said in remarks after the bank’s regular two-day meeting of senior officials. Read: The Fed sticks to the easy money strategy even as it sees a strengthening US economy. Powell also addressed one of the loudest critics of the Fed: former Treasury Secretary Larry Summers, who believes that The Fed’s easy-policy stance is risky, especially in light of the massive stimulus packages passed and planned by a Democrat-controlled Congress. When asked about Summers, Powell spent five minutes dismissing his concerns, prompting an economist to tweet a GIF of Michael Jordan doing a mate: In addition to Powell’s resolution, here are some other things we learned from the lecture by Powell Press: Will the Fed Start Talking? on the slowdown of the $ 120 billion per month in asset purchases? “No. This is not the time yet,” Powell said. He repeated that it would be “some time” before the Fed has that conversation. Some economists believe the earliest that could happen is at the next Fed meeting in June. But more believe Powell could use his annual speech at the Jackson Hole, Wyoming conference in late August to start that conversation.The housing market is not a bubble. Powell said he was somewhat uncomfortable with rising housing prices. housing and said it was not a ‘pure good’ but gave no indication that the Fed is thinking of getting involved. He pinned the problem on lack of supply and high demand. Homebuilders can react to this demand and generate more supply, “Powell said.” We don’t have those kinds of things where we have a housing bubble where people are too leveraged, “he said. put aside and let the house market When asked why the Fed needed to buy $ 40 million per month in mortgage-backed securities if the housing market was so strong, Powell said the purchases “are not intended to provide direct assistance to the housing market. . “He repeated that the Fed will shrink when the time comes. The Fed will not allow inflation to overheat Powell said the economy is facing “unprecedented events,” but the Fed believes price pressures will be temporary. “If inflation were to move persistently and materially above 2%,” the Fed would use its tools to reduce inflation. “We are all very familiar with the history of the 1960s. That is a very different situation,” he said. “We understand our work,” he said. Powell sees “foam” in financial markets Many economists think the main impact of the Fed’s asset purchases will be rising asset prices. Powell seemed to increase his level of concern here. “They’re seeing things in the capital markets that are a bit frothy,” he said. And Fed policy does play a role, he said. “The overall picture of financial stability is mixed, but overall, it is manageable,” he said. Powell says it will take time for labor market supply and demand to balance. Powell has been consistent in his belief that the Fed is “too far” from its targets primarily due to a weak labor market, where 8.5 million fewer Americans they are working now than before the pandemic. At the same time, employers are complaining to the Fed that they cannot find workers for their job openings. Powell said there were “a number of things” at stake and that he thought the balance between supply and demand for labor could take a few months to reach. The Fed chairman said the worker shortage was not exclusively caused by the pandemic, as some workers lack skills and do not live where there are job openings. The effects of the pandemic persist as some schools have yet to reopen and some workers continue to fear COVID-19. Furthermore, a considerable number of people have reported that they have decided to retire and it is too early to know if they will change their minds. Unemployment benefits may also be playing a role, he said. Wages have yet to go up, which would happen in a tight labor market. The 10-year Treasury bond BX: TMUBMUSD10Y declined little by little after Powell’s press conference, ending the session at 1.614%. The shares ended lower, with the Dow Jones Industrial Average DJIA, -0.48% minus 164.55 points.