Fed Chairman Powell Reiterated that He Would Maintain Loose Monetary Policy

US Federal Reserve Chairman Jerome Powell gave a public speech today on the improvement of the US economic outlook and its impact on the labor market, bond yields and central bank policy. He reiterated in the interview that he intends to maintain the central bank’s loose monetary policy until the labor market improves further. After investors analyzed his views, the U.S. stock market went down and Treasury bond yields rose.

Fed Chairman Powell reiterated that he would maintain loose monetary policy. After his speech, U.S. stocks declined and Treasury yields rose

Powell answered questions about how he views rising bond yields at The Wall Street Journal Jobs Summit and emphasized that the economy is far from reaching the level of full employment. He said that the central bank will maintain ultra-low interest rates and continue to make substantial asset purchases until “substantial progress is made” in achieving employment and inflation targets. He mentioned that it will take “some time” to make progress, but declined to disclose the specific expected time frame.

In recent weeks, the yield on 10-year Treasury bonds has risen sharply, affecting the long-term borrowing costs of consumers and businesses.

Fed Chairman Powell reiterated that he would maintain loose monetary policy. After his speech, U.S. stocks declined and Treasury yields rose

When asked about the recent surge in bond yields (because investors expected inflation and economic growth to pick up this year), Powell said, “This is a noteworthy thing, which caught my attention.” He then added that the Fed is considering “broad financial conditions” rather than a single measure.

After Powell made relevant remarks, the yield on the 10-year U.S. Treasury bond has jumped to 1.541%, which is expected to reach the highest closing price in a year. It began to climb sharply from the low point in early January, when the bond yield was only 0.915%. (Compared to a bolus note: yields rise when bond prices fall.)

This time Powell’s talk has attracted much attention, partly because it is Powell’s last public speech before the next Fed policy meeting to be held from March 16th to 17th.

Fed Chairman Powell reiterated that he would maintain loose monetary policy. After his speech, U.S. stocks fell and Treasury bond yields rose.

Powell said last week that the Fed will not raise its benchmark federal funds rate from “near zero” until the three conditions are met. These three conditions are: 1. A series of statistics show that the labor market is at its maximum intensity. 2. The inflation rate reaches 2%. 3. The forecaster expects that the inflation rate will remain at this level or higher.

While the inflation rate in the United States is still below 2%, the labor market is still far from the pre-pandemic state, and about 10 million jobs have been lost.

Fed Chairman Powell reiterated that he would maintain loose monetary policy. After his speech, U.S. stocks fell and Treasury bond yields rose.

Powell said today that he hopes that as the economy reopens, the labor market will show progress in the coming months. But when asked whether the labor market is likely to reach the Fed’s maximum employment target for this year, Powell said: “No, I think it’s very unlikely.”

The latest data shows that in the week ending Saturday, 745,000 Americans applied for their first unemployment benefits.

A key indicator of investor expectations for inflation has also soared recently. Data from Deutsche Bank shows that the five-year break-even point (reflecting the expected rate of price increases within five years from now) climbed above 2.5% for the first time in 13 years, and closed at 2.487% on Wednesday.

U.S. Treasury Inflation Protection Securities (TIPS) yields have also soared. According to data from Tradeweb, the 10-year TIPS yield rose to -0.741% today from -1.089% at the end of last year.

Fed Chairman Powell reiterated that he would maintain loose monetary policy. After his speech, U.S. stocks fell and Treasury bond yields rose.

Powell said: “We expect that as the economy reopens and is expected to rebound, we will see inflation rise through the Base Effect, which may cause certain upward pressure on prices.”

The Fed cut short-term interest rates to close to zero last year and has purchased at least $120 billion in U.S. Treasury bonds and real estate mortgage securities every month since June. Policymakers say these policies have reduced borrowing costs and provided meaningful support to the economy.

 

 

 

 

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