Fed Chairman “Economic Unrest… Sustained Supply of Liquidity”
Downtrend Dow S&P rebounds after Powell’s remarks
Jerome Powell Chairman of the US Central Bank (Fed). Photo = EPA
Jerome Powell, chairman of the US Central Bank (Fed), remained unchanged. However, amid the plunge in stock prices, investors interpreted Powell’s remarks positively.
Powell reaffirmed his position at the Senate Financial Committee hearing on the 23rd (local time), saying, “The economic recovery in the US is incomplete” and “while looking at employment and inflation, we will maintain the current level of zero interest rates for the time being.” .
The chairman of the Fed will attend the Senate and House hearings semiannually to testify on the economic situation and monetary policy. On the 24th, Chairman Powell goes to the House of Representatives.
“The economic recovery is uneven and remains far from complete,” Powell said. “The path forward is also very uncertain.” In particular, he stressed that the rate of improvement in the employment market has slowed, saying that service spending is still low, unlike household consumption.
It strongly suggested that the current zero interest rate would be maintained until the labor market reaches full employment and the inflation rate slightly exceeds the target (2.0%). “It is appropriate to keep the current stance until we reach maximum employment and inflation is on a path that gently exceeds 2% over a period of time,” Powell said.
Powell said, “Until further progress is made, we will keep purchasing government bonds and institutional security bonds at their current pace to provide liquidity.”
Since June of last year, the Fed has been supplying liquidity to the market by buying $120 billion worth of bonds per month. It means that it will take a lot of time to get to’tapering’, which means stepwise reduction in bond purchases.
“We understand that our actions affect households, businesses and communities,” he emphasized. “We are committed to using every means to support the economy and ensure that recovery from difficult times is as robust as possible.” did.
Regarding the spread of the new coronavirus infection (Corona 19), he said, “As the number of patients is decreasing and vaccinations are increasing, there is hope for returning to a more normal situation at the end of this year.”
Powell’s remarks are no different from what he has made several times before. However, it showed its power to calm down the plunging market.
Tesla shares, which had plunged to 13% on that day, rebounded after Powell’s remarks and ended with only 2.2% drop. Apple’s stock price also fell by more than 6%, then only 0.1% at the close.
In the New York Stock Exchange, the Dow index rose 15.66 points (0.05%) to 33,1537.35, the Standard & Poor’s (S&P) 500 index rose 4.87 points (0.13%) to 3881.37, and the Nasdaq index fell 67.85 points (0.50%) to 1,3465.20, respectively. Closed.
New York = Correspondent Jae-gil Cho [email protected]
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