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Powell signals, “I want to get back to normal.”

Federal Reserve Chairman Jay Powell told Congress this year that he “wants to return to a more normal state,” but said the central bank intends to maintain significant support for the economy. ..

His comment points out that the Fed will not tighten monetary policy early or draw down asset purchases, even with a brighter economic outlook. Technology share After plunging during an early transaction in New York, they regained most of their losses.

Talking to the Senate Banking Commission, Powell provided one of his more optimistic assessments of the economic situation since its inception. PandemicHowever, he emphasized that there is still a significant downside risk to recovery that justifies the central bank’s super-easy stance.

“In recent weeks, the number of new cases and hospitalizations has declined, and continued vaccination provides hope for a return to normal later this year, but economic recovery remains unsuccessful. It’s far from uniform and perfect, and the path ahead is very uncertain, “Powell said in his opening remarks.

“Don’t underestimate the challenges we are currently facing, but development shows an improvement in our outlook later this year,” he added.

U.S. Covid-19 outlook for improvement — New large-scale fiscal stimulus Backed by Congressional Democrats and President Joe Biden — many economists have been urged to upgrade their 2021 growth forecasts.

Some economists have seen a surge in economic activity Unhealthy jump of inflation, This will force the Fed to start tightening monetary policy sooner and more suddenly than expected.

The Nasdaq Composite fell 3.9% at the beginning of Tuesday. This is because rising interest rates could threaten the high valuations imposed by investors on the stocks of fast-growing tech companies. However, Powell spoke and recovered when it fell 0.5%.

In addressing inflation concerns, Fed officials downplayed the threat of rising prices, saying it was unlikely to persist. During the Q & A session with Senator, Powell said inflation dynamics “did not change at once” and “recently not really”, a strong relationship between budget deficits and inflation. Said there is.

Powell also pointed out the unused capacity of the labor market. 10m less Americans employed As one of the most worrisome aspects of the US economy compared to a year ago.

The Federal Reserve Board said it would not bring interest rates closer to zero from current levels until full employment is achieved, inflation reaches 2% and is “on track” above that target. He said he would not begin terminating the bond purchase program until “substantial further progress” was made towards that end.

1.35%

Yields on 10-year Treasuries on Tuesday rose from 0.91% at the end of 2020

“The economy is far from our employment and inflation goals, and it may take some time before substantial further progress is achieved. Progress towards our goals before the pace of purchases changes. We will clearly communicate the assessment of the situation, “says Powell.

During the testimony, Powell was repeatedly pressured by Senator on the following benefits: Biden’s $ 1.9 trillion stimulus, However, he refused to take a position. When asked by Louisiana Republican Senator John Kennedy that Congress was “cool” for not passing the stimulus bill, Powell replied: That’s what I’m not doing and I’m expressing my opinion. ”

Financial markets are already beginning to consider brighter outlooks. Last week, sales of US Treasuries surged. Yields on 10-year government bonds on Tuesday were 1.35%, up from 0.91% at the end of last year. Treasury market volatility is rising, emphasizing the potential for greater volatility in the coming weeks.

Inflation adjusted Treasury yields have also skyrocketedThere is growing concern among investors that a surge too fast could shock risky assets and threaten Wall Street’s record-breaking equity market operations.

“It’s not really an absolute yield [levels] Anders Persson, chief investment officer of Nuveen’s fixed income, added that a 10-year Treasury yield would rise by 0.5-0.75 percentage points in a short period of time. It can “fool” investors.

Powell signals, “I want to get back to normal.”

Source link Powell signals, “I want to get back to normal.”

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