Federal Reserve Chairman Jerome Powell prepares for a hearing by the House’s Financial Services Committee on “Supervising the Department of the Treasury and Responding to the Federal Reserve’s Pandemic” at the Rayburn House Office Building in Washington, DC on December 2 2020.
Jim Lo Scalzo | Reuters
Congress’ powerful fiscal aid combined with accelerated vaccine distribution has allowed the US economy to recover faster than expected, Federal Reserve President Jerome Powell said on Thursday.
At some point, this will allow the central bank to resume the aid it has provided, although he said that now is not the time.
“As we make substantial progress toward our goals, we will gradually reverse the amount of Treasury bills and mortgages we buy,” Powell told NPR’s “Morning Edition” in a live interview. “We are going very gradually over time and with great transparency, when the economy is fully recovered, we will be withdrawing the support that we provide in times of emergency.”
US stock market futures fell a little after Powell spoke.
In the wake of the Covid-19 blockades just over a year ago, the Fed has cut short-term loan interest rates to almost zero and has been buying at least $ 120 billion in bonds every month.
Powell and other Fed officials have pledged to maintain this accommodation until the economy reaches full employment and inflation is around 2%. He said the United States has made progress towards achieving those goals.
“In a nutshell, it is a combination of better developments at Covid, particularly vaccines, and also economic support from Congress. This is really what is driving this, ”he said. “This will allow us to reopen the economy sooner than expected.”
The United States vaccinates about 2.5 million people a day, and hospitalization and mortality rates have generally declined, although the number of cases has stabilized or is gradually increasing in some states.
Congress approved more than $ 4 trillion in stimulus last year and is possibly forecasting another $ 3 trillion in future spending.
Powell called current fiscal practices “unsustainable”, although necessary in the face of the crisis. Low interest rates are allowing the United States to bear the debt burden without causing too much trouble, although Congress will eventually have to deal with the debt issue, he said.
“We need to do this, but this is not the time now,” said Powell.
Looking back over the past year, he said he did not regret the extraordinary measures the Fed took, even with some critics fearing that the amount of fiscal and monetary stimulus could be problematic later on, if the economy overheats.
“Ultimately, in a crisis, I think what we did served its purpose in avoiding what could have been far worse results,” said Powell.