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Fed Chairman “Economic unrest … sustained supply of liquidity”
Bearish trend Dow S&P recovers after Powell’s remarks
Jerome Powell, president of the United States Central Bank (Fed). Photo = EPA
Jerome Powell, president of the United States Central Bank (Fed), was unchanged. However, amid falling stock prices, investors read Powell’s comments positively.
Powell reaffirmed his position at the Senate Finance Committee hearing on the 23rd (local time), saying: “The economic recovery in the US is incomplete” and “as we look at employment and inflation, we will maintain the current level of zero interest rates for the moment. ”.
The Fed chairman will attend Senate and House hearings every six months to testify on the economic situation and monetary policy. On the 24th, President Powell addresses the House of Representatives.
“The economic recovery is uneven and far from complete,” Powell said. “The way forward is also very uncertain.” In particular, he noted that the pace of improvement in the labor market has slowed, saying that spending on services remains low, unlike household consumption.
He 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 maintain the current stance until we hit the highest level of employment and inflation is on a path that smoothly passes 2% over a period of time,” Powell said.
Powell said: “Until further progress is made, we will continue to buy government bonds and institutional security bonds at the current rate to provide liquidity.”
Since June last year, the Fed has been providing liquidity to the market by buying bonds worth $ 120 billion a month. It means that it will take a long time to get to “fine-tuning”, which means a gradual reduction in bond purchases.
“We understand that our actions affect homes, businesses and communities,” he emphasized. “We are committed to using all means to support the economy and ensure that the recovery from difficult times is as robust as possible.”
Regarding the spread of the new coronavirus infection (Corona 19), he said: “As the number of patients decreases and vaccines increase, there is hope to return to a more normal situation by the end of this year.”
Powell’s comments are no different from what he has made several times before. However, it showed its power to calm the market crash.
Shares of Tesla, which had fallen to 13% that day, rallied after Powell’s remarks and ended down just 2.2%. Apple’s stock price also fell more than 6%, then just 0.1% at the close.
On 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.
New York = Correspondent Jae-gil Cho [email protected]
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