US Fed chief ditches ‘transitory’ tag, paves way for rate hike
WASHINGTON (BLOOMBERG) - Team Transitory is throwing in the towel. In a clear sign that the US Federal Reserve is shifting to tighter monetary policy, Jerome Powell - who's spent months arguing that the pandemic surge in inflation was largely due to transitory forces - told Congress on Tuesday (Nov 30) that it's "probably a good time to retire that word." The Fed chair, tapped last week for another four-year term, still thinks inflation will ebb next year. But in testimony before the Senate Banking Committee, he acknowledged that it's proving more powerful and persistent than expected, and said the Fed will consider ending its asset purchases earlier than planned. "It looks like the Fed wants to create some space to give them the option to raise rates well before the end of next year if they feel they need to," said Brian Coulton, chief economist for Fitch Ratings. Tightening credit before the jobs market has returned to the halcyon days that prevailed before Covid-19, when Black unemployment was at record lows and labour force participation was elevated, could invite criticism that the Fed is stepping away from the new monetary policy framework it adopted last year. That was desig...
Markets see June liftoff on US rate hikes after Biden sticks with Powell to lead Fed
WASHINGTON (BLOOMBERG, REUTERS) - Traders are pricing in a ramp-up in tapering bond purchases by the US Federal Reserve and the potential for a June liftoff on rate hikes after President Joe Biden selected Jerome Powell to serve another four years as the central bank's chair. Futures on the federal funds rate, which track short-term interest rate expectations, have fully priced in a quarter-point tightening by next June, up from more than 90 per cent before Mr Biden's announcement. The simple fact that the pick is now out of the way may allow the Fed to turn slightly more hawkish, said analysts. There has been a notable repricing already, related in large part to the fact that Lael Brainard - the candidate that Mr Biden did not tap to lead the Fed - was perceived as potentially less inclined to tighten policy than incumbent Mr Powell. But the removal of some concerns over renomination could also allow Mr Powell himself to cut loose a little more and follow the kind of less-expansive policy that some many observers believe is warranted. While the leadership of the US central bank is always important to markets, Mr Biden's decision takes on heightened significance this year as the Fe...
‘Tension’ between jobs, inflation the chief challenge facing US central bank: Fed chief
WASHINGTON (REUTERS) - Resolving "tension" between high inflation and still-elevated unemployment is the most urgent issue facing the Federal Reserve right now, its chairman Jerome Powell said on Wednesday (Sept 29), acknowledging the US central bank's two goals are in potential conflict. "This is not the situation that we have faced for a very long time and it is one in which there is a tension between our two objectives...Inflation is high and well above target and yet there appears to be slack in the labour market," Mr Powell said at a European Central Bank forum, an apparent reference to the 1970s bout of US "stagflation" that combined high unemployment and fast-rising prices. The United States is more than 5 million jobs short of where it was before the pandemic. At the Fed's most recent meeting policymakers lifted their inflation forecasts for this year to 4.2 per cent - more than twice the targeted level of 2 per cent. They see that pace easing in 2022 to 2.2 per cent, modestly above where they had pegged it in their previous projections in June. Mr Powell said the Fed's working "hypothesis" is that inflation will largely ease on its own as the global economy returns to norm...
US stocks mixed as market digest earnings, Fed decision
NEW YORK (AFP) - The Nasdaq rallied while the Dow fell on Wednesday (July 28) as investors digested a slew of mostly positive earnings reports and a Federal Reserve decision that maintained accommodative monetary policies. One of the busiest 24-hour stretches of earnings season featured mostly strong reports from a litany of huge companies, including Apple, Google parent Alphabet, Starbucks and Boeing. But several of the companies declined anyway, suggesting investors believe "that it will be hard to sustain the same level of growth moving forward and that a lot of the good news has been priced in," according to Briefing.com. Meanwhile, the Fed again described the US economy as improving but still in need of support, with Fed chairman Jerome Powell offering little specificity on when stimulus measures will be reduced. "There's a range of views on what timing will be appropriate," he said. "No decisions were made." The Dow Jones Industrial Average finished down 0.4 per cent at 34,930.93. The broad-based S&P 500 was flat at 4,400.64, while the tech-rich Nasdaq Composite Index gained 0.7 per cent to 14,762.58. Among individual companies, Boeing surged 4.2 per cent after reporting a su...
US Federal Reserve keeps rates unchanged but cites ‘progress’ towards its goals
WASHINGTON (NYTIMES) - The Federal Reserve kept interest rates unchanged on Wednesday (July 28) and said it would continue buying large quantities of government debt, but suggested that it could slow those purchases before long if the economy continues to strengthen. The central bank has been buying US$120 billion (S$160 billion) in mortgage-backed securities and Treasury debt each month since last year, but economists expect the Fed to begin slowing those purchases later this year or early next. Its policy interest rate is still set to near-zero, and is not expected to increase anytime soon. At a news conference following the Fed's two-day meeting, Jerome Powell, the Fed chair, said that "the timing of any change in the pace of our asset purchases will depend on the incoming data." "We're going to continue to try to provide clarity as appropriate, on timing, pace and composition," Powell, adding that the July meeting discussion was the first deep-dive into those issues. "I'd say we have some ground to cover on the labour market side," Powell said, noting that he would "want to see" strong job numbers before declaring that the Fed's "substantial further progress" standard has been ...
Fed chief offers more assurances on US economy despite inflation
NEW YORK (AFP) - The United States economy remains on a positive trajectory even as it contends with higher inflation, according to congressional testimony released on Monday (June 21) by the head of the Federal Reserve. Fed chair Jerome Powell, in prepared remarks ahead of a House hearing on Tuesday, reiterated that the central bank will continue its supportive stance to ensure that the "sustained improvement" since the depths of Covid-19 pandemic is extended. The labour market has improved, but progress has been "uneven", said Mr Powell, in remarks consistent with his response to questions at a news conference last week. "We at the Fed will do everything we can to support the economy for as long as it takes to complete the recovery," Mr Powell said in the testimony. Mr Powell acknowledged that inflation has "increased notably in recent months" due in part to higher oil prices and the hit from supply chain disruptions. But he restated that higher prices are due to "transitory" factors, adding that "inflation is expected to drop back toward our longer-run goal". Mr Powell's appearance before the House Select Subcommittee on the Coronavirus Crisis comes less than a week after the US...
Fed’s Powell: US economy at an ‘inflection point’
NEW YORK (REUTERS) - The US economy is at an "inflection point" with expectations that growth and hiring will pick up speed in the months ahead, but some risks remain, particularly any resurgence in the coronavirus pandemic, Federal Reserve Chair Jerome Powell said. In a brief preview of a longer interview with CBS' news magazine program "60 Minutes" set to air in full on Sunday night, Mr Powell echoed both his recent optimism about the economy and a now-familiar warning that Covid-19 remains the main risk. "We feel like we're at a place where the economy is about to start growing much more quickly and job creation coming in much more quickly, so the principal risk to our economy right now really is that the disease would spread again," Mr Powell said. "It's going to be smart if people can continue to socially distance and wear masks." Indeed, recent data on the economy has been positive by and large, with a better-than-expected 916,000 jobs created in March and some Fed officials suggesting a run of a million new jobs a month is possible later this year. While pockets of the United States are seeing an upswing in Covid-19 cases - in Michigan in particular - infection rates in larg...
As US prospects brighten, Fed chief sees risk in global vaccination pace
WASHINGTON (NYTIMES) - Jerome Powell, the Federal Reserve chair, stressed on Thursday (April 8) that even as economic prospects look brighter in the United States, getting the world vaccinated and controlling the coronavirus pandemic remain critical to the global outlook. "Viruses are no respecters of borders," Mr Powell said while speaking on an International Monetary Fund panel. "Until the world, really, is vaccinated, we're all going to be at risk of new mutations and we won't be able to really resume activity with confidence all around the world." While some advanced economies, including the US, are moving quickly toward widespread vaccination, many emerging market countries lag far behind: Some have administered as little as one dose per 1,000 residents. Mr Powell joined a chorus of global policy officials in emphasizing how important it is that all nations - not just the richest ones - are able to widely protect against the coronavirus. Kristalina Georgieva, IMF managing director, said policymakers needed to remain focused on public health as the key policy priority. "This year, next year, vaccine policy is economic policy," Ms Georgieva said, speaking on the same panel. "It ...
Powell: US economy looks to be strengthening
WASHINGTON (REUTERS) - The US economy is "much improved", Federal Reserve Chair Jerome Powell said on Monday, crediting Congress and the central bank both for providing "unprecedented" support, but at the same time warning that the recovery is still "far from complete". "The recovery has progressed more quickly than generally expected and looks to be strengthening," Powell said in remarks prepared for delivery to a congressional hearing on Tuesday morning. Household spending has risen, he said, and the housing sector has more than fully recovered. "However, the sectors of the economy most adversely affected by the resurgence of the virus, and by greater social distancing, remain weak, and the unemployment rate - still elevated at 6.2 per cent - underestimates the shortfall, particularly as labour market participation remains notably below pre-pandemic levels," he said. "The recovery is far from complete, so, at the Fed, we will continue to provide the economy the support that it needs for as long as it takes." Powell's prepared remarks hewed to the tone of cautious optimism he has struck in recent weeks amid indications that a recovery is gaining strength. Fed policymakers and many...