Federal Reserve Chairman Jerome Powell is preparing for a hearing on the House Financial Services Committee on “Monitoring the Pandemic Response of the Department of the Treasury and the Federal Reserve,” in the Rayburn House office building in Washington, DC, on December 2. 2020.
Jim Lo Scalzo | Reuters
Strong congressional fiscal assistance, combined with accelerated vaccine distribution, has allowed the US economy to recover faster than expected, Federal Reserve Chairman Jerome Powell said on Thursday.
At some point, this will allow the central bank to turn back to the help it offered, although it said now is not the time.
“As we make substantial progress toward our goals, we will gradually return to the value of the treasuries and mortgage-backed securities we have purchased,” Powell told NPR’s “Morning Edition” in a live interview. “We will do it gradually over time and with great transparency, when the economy has recovered almost completely, we will withdraw the support we offered in times of emergency.”
Futures on the US stock market rose slightly less after Powell spoke.
Following the Covid-19 pandemic, just over a year ago, the Fed cut short-term lending rates to almost zero and bought at least $ 120 billion worth of bonds each month.
Powell and other Fed officials have pledged to maintain that accommodation until the economy reaches full employment and inflation averages about 2%. He said the United States has made progress in achieving these goals.
“In short, it’s a combination of better developments on Covid, especially vaccines and also financial support from Congress. In fact, that’s what drives it,” he said. “This will allow us to reopen the economy sooner than might have been expected.”
The United States has vaccinated nearly 2.5 million people a day, and hospitalization and death rates have generally declined, although case loads have paid off or are gradually increasing in some states.
Congress has approved more than $ 4 trillion in stimulus in the last year and is looking at another $ 3 trillion in future spending.
Powell called the current tax practices “unsustainable”, although necessary in the face of the crisis. Low interest rates allow the US to bear the debt without causing too much trouble, although Congress will eventually have to address the debt issue, he said.
“We will have to do this, but that moment is not now,” Powell said.
Looking back over the past year, he has said he does not regret the extraordinary measures the Fed has taken even though some critics worry that the value of fiscal and monetary stimulus could prove annoying later if the economy overheats.
“Finally, in a crisis, I think what we did served its purpose in avoiding what could have been much worse results,” Powell said.