Fed's Powell says does not want to return to bad old days of inflation

Author: Eamonn Sheridan | Category: Central Banks

Further headlines are crossing from Federal Reserve Chair Powell interview on US TV show 60 Minutes

Adam had this news earlier from the interview:

Further now, Headlines via Reuters:

  • reopening too quickly a 'principal risk' to recovery 
  • Fed will support economy until recovery is complete
  • in assessing progress wants to see labor force participation moving back up
  • Fed does not want inflation to go materially above 2% and return to the 'bad, old inflation days'
  • does want inflation 'moderately' above 2% for some time
  • does not appear the case now that large federal deficits cause inflation
  • some parts of the country more than fully recovered, but real disparities exist
  • lower wage workers who lost jobs should be able to return to them 'much faster now'
  • for many people, the covid recession is over but for millions of others it is not and 'we're going to keep those people in mind'
  • economic recovery has been 'better, consistently better than I'd expected', helped by support from congress and the Fed
  • with vaccinations 'you're seeing the resumption of what appears to be a very strong expansion'

  • asked if he feared the US a year ago was looking at a great depression scenario, says 'I never really thought that was a likely outcome'
  • would have been 'shocked' if told this time last year that more than 550,000 Americans would die of covid
  • some asset prices are elevated by some historical metrics
  • fed can't predict asset bubbles, more focused on resiliency of system if shocks occur
  • believes financial system has wherewithal to stand significant shock to markets
  • 'very low' chance of a repeat of the 2008 financial crisis
  • 'most parts of the financial system made it through quite a stress test' in last year's economy collapse
  • monitoring situation with Archegos 'very carefully,' does not seem to raise issues around stability of the financial system or the institutions involved
  • is concerning that a single client could cause such large losses, suggest 'significant shortfall' in understanding of risks
  • fed working hard studying digital currency, but no decision yet
  • possible digital currency could be a benefit, but involves 'subtle, complex' set of questions


Bolding above is mine. Powell's Fed has promised inflation will be allowed to rise above 2%, actual and not just the forecast, which indicates a looser attitude than in the past. The market is pricing hikes sooner than the Fed is indicating but BoA say tightening could be sharper than expected, as posted earlier:


Further headlines are crossing from Federal Reserve Chair Powell interview on US TV show 60 Minutes
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