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[Washington, 23, Reuters]-Federal Reserve Chairman Powell talks about measures to recover from the coronavirus disease at a Senate hearing on 23rd. He also gave a look at the Fed’s stance to abandon established theory.
Powell explained that the Fed will focus on the number of employees, not the unemployment rate, and its goal is to increase the number of employees. He noted that inflation would not be an immediate problem.
When asked by Democratic Senator Mark Warner about the need for a “big investment” in national infrastructure, Powell responded, “As far as I can imagine, it doesn’t matter right now.” It did not satisfy the typical concern that large amounts of government loans would drive up prices.
He also said that the money supply, which the Fed once paid attention to and was regarded as an important indicator of the supply of currencies such as cash, is no longer relevant. “When we studied economics a long time ago, M2 and the money supply were thought to be related to economic growth,” he told Republican Senator John Kennedy in his 60s. M2 has no significant implications. This knowledge must be forgotten. “
In the fields of the Fed and economics, there has recently been a notable move to abandon traditional economic theories. Even before the corona epidemic, the Federal Reserve had been revising its traditional view that lowering the unemployment rate led to higher inflation and that unemployment and inflation were inversely related.
The unemployment rate is that of the unemployed divided by the sum of the unemployed and the unemployed seeking work. The denominator does not include people who have left the labor market, such as retirees or women who have quit their jobs due to crown disease, and unemployment may be an outdated indicator in this regard.
Powell said the Fed has recently focused on employment and unemployment when considering its goal of maximizing employment, and said it is targeting a “high level of labor force participation.”
