Fed’s Powell set to testify before lawmakers on pandemic programs
WASHINGTON – Federal Reserve Chairman Jerome Powell will travel to Capitol Hill on Tuesday to testify before a House subcommittee overseeing efforts to guide the economy during the Covid-19 pandemic.
The hearing aims to focus on the lessons learned by the Fed, which launched a series of extraordinary loan programs at the start of the pandemic. These included efforts to calm market turmoil, remove borrowing costs, and lend money directly to certain businesses and local governments.
“Our actions, taken together, have helped unlock more than $ 2 trillion in funding to support businesses large and small, nonprofits, and state and local governments between April and December 2020,” Mr. Powell in a prepared testimony published Monday. “This, in turn, has helped prevent organizations from shutting down and put employers in a better position to keep workers and hire them as the recovery continues.”
Emergency programs ended at the end of 2020.
Mr Powell is also expected to ask questions about the Fed’s monetary policies, which remain extremely stimulating to support the economic recovery. His prepared remarks on the economy were largely in line with comments made at a press conference on June 16.
The Fed voted last week to keep short-term rates close to zero, where they’ve been set since March 2020, and to continue buying at least $ 120 billion in treasury and mortgage bonds each month until then. for the economy to recover further.
Fed officials have indicated that they expect to start raising interest rates sooner than they expected. Most of them now plan to hike the overnight federal funds rate by at least half a percentage point by the end of 2023, according to quarterly forecasts released last week. In their previous forecast, released in March, most expected the rate to be close to zero until 2023.
In addition, they began to discuss a possible reduction or decrease in the Fed’s bond purchases.
The Fed said it plans to continue buying bonds at the current rate until the economy makes “further substantial progress”, measured from December, towards its targets of full employment and sustained inflation. by 2%. Officials haven’t set clear benchmarks for any of these criteria, but many private economists believe they may start to decline later this year.
The economy’s recovery this year has been much faster than expected, thanks to steady progress in vaccinations, declining Covid-19 cases and billions of dollars in fiscal stimulus. Total economic output is expected to exceed pre-pandemic levels in the current quarter, and various indicators suggest workers are enjoying greater leverage as companies scramble to meet demand.
Meanwhile, the labor market’s recovery has been a bit slower than Mr Powell had hoped for earlier in the spring. And a surge in inflation in April and May added to the reasons Fed officials plan to hike interest rates earlier than expected.
Bond purchases are aimed at maintaining long-term interest rates in order to encourage American consumers and businesses to borrow and spend.
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