Economy in general: Economy: News: Hankyoreh Mobile

The period during which US Treasury yields dominate the market is getting longer. The Federal Reserve Board of the United States (Fed) appears at every turn and tries to comfort her younger, but the’central bank time’ has not exceeded a day. Is the Fed tricking the market or is the mayor misunderstanding the Fed?

Fed Chairman Jerome Powell’s comments and expressions these days show that he has become stronger. Treasury Secretary Janet Yellen is standing behind. In February 2018, he was between former and current Fed chairmen, whose fates were “hard” and “selected” by the then-president Donald Trump, but the current Yellon-Powell alliance seems to be solid. First of all, Minister Yellen has a higher understanding of the Fed’s role and monetary policy than anyone else. Chairman Powell has also served as Vice Minister of the Treasury, breaking through the path of policy coordination. In the days of Trump’s Finance Minister Stephen Manusin, he repeatedly emphasized the importance of expanding fiscal policy, but now it is not necessary. This is because the policy orientation that’recovery of employment’ is a priority is consistent with Minister Yellen. As the chairman of the Fed, Yellen advocated a’high pressure economy’ to induce a policy of inducing a phase in which demand from the economy temporarily exceeds supply. He believes that a strong stimulus for demand such as consumption and investment can positively affect supply factors such as labor, resources, and technology, thereby raising the potential growth rate. On the 14th, Yellen said on ABC Broadcasting on the 14th, “We have hopes that we will be able to return the economy to a state near full employment next year with a fiscal stimulus plan of $1.9 trillion and investment in infrastructure.” Regarding the recent inflation concerns, he dismissed, “The risk of inflation is not large and manageable, and we never expect a continuous high inflation like in the 1970s.” When the Fed was chairman of the Fed, Yellen was sorry for the fact that even though the unemployment rate was low enough to use the expression’wage riddle’, wages and inflation did not rise. Yelan’s high-pressure economy is in context with the flexible’Average Price Target’ (AIT) adopted by Powell’s Fed in August last year. If the inflation rate is consistently below the 2% target value, it is a policy to allow inflation to gradually exceed 2% for a considerable period of time thereafter. It was evaluated that the center of gravity of the monetary policy goal has shifted from’price stability’ to’full employment’. The two especially emphasize the recovery of employment for the vulnerable. The economy must be heated so that the underprivileged, whose warmth of economic recovery is the latest, can enter the labor market and get good jobs. At a press conference held after the Federal Open Market Committee (FOMC) on the 17th, Powell said, “With Corona 19, the unemployment rate of minorities has risen twice as fast as that of white people. This is in progress.”

The market is looking at the Fed with concern as the upward pressure builds up on inflation. This is because inflation is the strongest factor to shake the low interest rate trend. So, the Fed has comforted the market to keep the interest rate low for a considerable period of time even when inflation exceeds the target value, so don’t worry. In addition, this year’s inflation was defined as a temporary phenomenon due to the base effect. The question depends on whether the financial markets will believe Yellen and Powell’s words that inflation is temporary and controllable. The recent surge in US Treasury yields reflects the fact that the market is suspicious of this statement and expects the austerity period to be accelerated. Samsung Futures economist Seo-young Choi pointed out, “If the situation worsens, the Fed may be forced into a situation in which the Fed is forced to tighten in order to control prices without waiting for unrecovered employment.” Markets that are addicted to liquidity and are showing signs of withdrawal are hoping the Fed will come forward. However, from the Fed’s point of view, it seems that it is not bad for asset prices, which have risen sharply apart from the real economy, to undergo some adjustments. Powell said at a conference on the 17th, “I think it is certain that the valuation of some assets is historically high by some standards.” SK Securities researcher compared it to’a family in which a father (Powell) and a mother (Yellen) go on a trip with two children (prices, employment) whose circumstances are the opposite.’ But the parents say that they will come back and don’t care much, and then the people around (the mayor) are worried that this could lead to a big deal. The problem is that the second (employment) may have to go into the operating room because his condition becomes serious to be.” Richard Bernstein, a famous Wall Street investor, recommended in a recent column, “Parents train babies to fall asleep on their own without soothing their awakenings.” In an interview with former New York Fed governor Bill Dudley, who tends to be hawkish (preferring to tighten), in an interview with the mayor, “The mayor’s’anger attack’ against the Fed trying to overheat the economy is just the beginning.” Senior Reporter [email protected]