Comments from the Fed chair in response to Senate questions

Comments from the Fed chair in response to Senate questions

Powell was asked about inflation and tapering and responded/repeated that they will need to see substantial further progress in the economy and added that they haven't seen that in the past 3 months but said they expect some improvement in the remainder of the year.

  • Expect inflation to temporarily move up on base effects
  • We could be getting through this pandemic much more quickly than feared by 'job is not done yet'
  • Over time growth of balance sheet will slow but asset purchases will continue until substantial further prioress is seen
  • If we get unwanted inflation, we have the tools to deal with it
  • Doesn't see how a burst in fiscal support or spending would lead to high inflation
  • Inflation dynamics do not change on a dime
  • Does not seem likely that increase in spending would lead to large or persistent inflation
  • Won't take a position in minimum wage debate
  • I don't think uptick in inflation that's coming in the months ahead will be large or persistent
  • No intention of repeating inflation mistake of 1970s

I admire global central bankers' resilience in dismissing inflation fears but I also question it. The thing is, you can't be wishy-washy in central banking. If your position is "I have no idea what will happen with inflation" then you're tossed out.

Powell was asked what's the message he wants to send.

Highlights 10m jobs lost and says there is a "long way to go". He adds that you can expect the Fed to move carefully and patiently with a lot of advance warning.

That's about as good as it gets if you want a green light to buy risk assets and sell the dollar.