The verdict may be handed down over Jerome Powell as central banker, but the Federal Reserve chairman is a top politician. His long-awaited (virtual) speech at the Jackson Hole monetary conference on Friday offered a sunny view of the economic horizon and an extensive apology for the Fed’s performance on its watch. You might think he is running for office. . . oh, wait, wait a second four-year term as president and President Biden will make his decision soon.
The main headline of the speech is that, currently, the Fed will begin to reduce its extraordinary purchases of monthly bonds this year. But in case anyone thought this meant a monetary tightening, Powell quickly pointed out that the Fed is not about to reduce its balance sheet, now to $ 8.3 trillion, or raise interest rates for much longer. time.
The message is that the Fed will remain super accommodative, although nominal GDP could grow by 10% this year. Investors, who appreciate the Fed’s support for asset prices, offer shares in the news. This will not hurt Mr. Powell’s chances of renaming the White House.
Powell justified the Fed’s continued and historic historical ease on the grounds that while labor market prospects are excellent, the labor market recovery has been uneven. But it’s always after a recession. Powell’s case is that the 5.4% unemployment rate “underestimates the amount of arrow in the labor market.”
He might be right, though one of the reasons for any loosening is that the welfare of the government and the unemployment benefits Powell encouraged earlier this year pay more people who don’t work than if they occupy a job. work. No mention of this in his observations.