Federal Reserve Chairman Jerome Powell prepares for a hearing of the House Financial Services Committee on “Monitoring the Pandemic Response of the Treasury Department and the Federal Reserve” in the Rayburn office building House in Washington, DC on December 2, 2020.
Jim Lo Scalzo | Reuters
Powerful Congressional fiscal aid combined with the accelerated distribution of vaccines has allowed the U.S. economy to recover faster than expected, Federal Reserve Chairman Jerome Powell said Thursday.
At some point, this will allow the central bank to call back for the help it has provided, although it said it is not the time now.
“As we move substantially toward our goals, we will be recovering the amount of treasures and mortgages we have purchased,” Powell told NPR’s “Morning Edition” in a live interview. “We will go progressively over time and with great transparency, when the economy has fully recovered, we will withdraw the support we have provided during times of emergency.”
Future U.S. stock markets rose slightly downward after Powell spoke.
Following the Covid-19 pandemic just over a year ago, the Fed cut short-term benchmark lending rates to near zero and has bought at least $ 120 billion in bonds each month.
Powell and other Fed officials pledged to maintain this housing until the economy reaches full employment and inflation averages around 2%. He said the United States has made progress in achieving these goals.
“Simply put, it’s a combination of Covid’s best developments, especially vaccines, and also congressional financial support. That’s what’s driving it,” he said. “This will allow us to reopen the economy sooner than expected.”
The United States has vaccinated about 2.5 million people a day, and overall hospitalization and mortality rates have dropped, although case loads have stagnated or gradually increased in some states.
Congress has approved more than $ 4 trillion in stimulus over the past year and is possibly studying another $ 3 trillion in future spending.
Powell considered current tax practices to be “unsustainable,” though necessary in the face of the crisis. Low interest rates allow the United States to take on the debt burden without causing too much difficulty, although Congress will eventually have to address the debt issue, he said.
“We’re going to have to do this, but this time is not now,” Powell said.
Looking back over the past year, he said he does not regret the extraordinary measures the Fed took, although some critics worry that the amount of fiscal and monetary stimulus could be problematic later on if the economy overheats. .
“In the end, in a crisis I think what we did served to prevent what could have been a lot worse,” Powell said.