Powell takes a victory lap

The verdict may have fallen on Jerome Powell as central banker, but the chairman of the Federal Reserve is a leading politician. His lon...


The verdict may have fallen on Jerome Powell as central banker, but the chairman of the Federal Reserve is a leading politician. His long-awaited (virtual) speech at the Jackson Hole monetary conference on Friday offered a sunny view of the economic horizon and a prolonged excuse for the Fed’s performance under his watch. You might think he is running for office. . . oh wait, he’s hoping for a second four-year term as president, and President Biden will make his decision soon.

The main headline of the speech is that on the current price, the Fed will start cutting back on its extraordinary monthly bond purchases this year. But in case anyone thought it meant monetary tightening, Mr Powell quickly noted that the Fed was not about to cut its balance sheet, now at $ 8.3 trillion, or raise rates. of interest for a very long time.

The message is that the Fed will remain super accommodating, even though nominal GDP could grow 10% this year. Investors, who like the Fed’s support for asset prices, are pushing stocks up on the news. This will not hurt Mr. Powell’s chances of re-appointment to the White House.

Mr. Powell justified the continued and historic easing of Fed policy on the grounds that while the labor market outlook is excellent, the labor market recovery has been patchy. But that’s always after a recession. Mr Powell’s case is that the unemployment rate of 5.4% “underestimates the amount of underemployment in the labor market”.

He might be right, although one of the reasons for any slackening is that the government welfare and unemployment benefits that Mr Powell encouraged earlier this year pay people more for not working than if they accepted. a job. No mention of this in his remarks.

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Newsrust - US Top News: Powell takes a victory lap
Powell takes a victory lap
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