Fed’s Powell seems to be repeating a “patient” approach in public

WASHINGTON (Reuters) – U.S. Federal Reserve Chairman Jerome Powell, who pledged to keep credit loose and flowing until Americans are back to work, will appear in a public forum Thursday at a time when investors global casts open doubt on whether it can keep that promise as soon as the pandemic and the economy go out on its own.

Powell’s message is likely to remain at the 12:05 EST (1705 GMT) Wall Street Journal forum as delivered a week ago in a backstage appearance on Capitol Hill, and other Fed policymakers have been appearing ever since : Don’t bet against us.

The comments from Powell’s last public comments appear to be ahead of a press conference on March 17 after Fed’s next policy meeting.

“We are 10 million jobs below where we were in February 2020. 10 million paid jobs. So there is a long way to go, ”Powell told the Senate Banking Committee on February 23 when asked what his message was to investors who had started pushing long-term interest rates there. the bet that the Fed was likely to tighten its lending terms. faster than expected.

“Monetary policy is appropriate, and it needs to continue … at the moment, we have had (average) 29,000 jobs every month. This is not a big improvement. ”

ALL ON BOARD

Some version of that statement was made by half a dozen Fed policymakers since then against rising government bond yields that have pushed the 10-year U.S. Treasury note yield more than half a percentage point since the year began . It is now at about 1.5%, three times what it was last August and around where it was before a pandemic outbreak of coronavirus.

The Fed siege is in an attempt to interpret that trend as showing confidence in the country’s economic recovery, not evidence of undermining expectations of future inflation or a full-time bet that the Fed would try to raise rates on its own to keep the economy from overheating.

Instead, policymakers have pledged to keep their short-term policy interest rate close to zero for perhaps years to come. They have also pledged to keep long-term borrowing costs, which are important to consumer and business decisions to buy autos and homes or invest in new buildings, by buying $ 120 billion each months in government securities.

If anything, analysts feel Powell could target the Fed’s ability to engage more aggressively and increase bond purchases if long-term yields continue to rise.

This is probably an inflection moment. Fifty million people have been vaccinated at least partially against the coronavirus, the outbreak is accelerating, and economic growth is expected. Households are sitting on perhaps $ 1.5 trillion in additional savings they may be willing to spend once it’s safe.

Add to that a $ 1.9 trillion federal spending bill close to an agreement in Congress, and economic forecasters anticipate potential growth at the U.S. level this year.

In the recent past, this situation may have led policymakers to conclude that inflation was certain to continue, and a move to stay ahead of it by reducing the amount of strong current support for families and companies.

But the Fed now sees inflation as a lower risk, and has placed more emphasis on policy-making on achieving – and sustaining – highest earnings, second one of the two goals set by Congress.

When it comes to shifting gears, Powell told US seniors, “expect us to move carefully and patiently and with a lot of positive caution. ”