Market News Fed Chairman Powell: There is no direct signal meaning to reduce debt purchases, and it is not the time to raise interest rates
Fed Chairman Powell: There is no direct signal meaning to reduce debt purchases, and it is not the time to raise interest rates
GMT+8 At 02:30 on Thursday morning, Federal Reserve Chairman Powell emphasized at a press conference after the interest rate decision that the timing of debt reduction has no direct signal significance for interest rate hikes. The focus of the November monetary policy meeting is to reduce debt purchases. , Instead of raising interest rates. Powell said that by the second or third quarter of next year, the inflation rate is expected to fall, and the timing of interest rate hikes will "depend on the path of the economy." Now is not the time to raise the benchmark interest rate.
2021-11-04
10117
Powell said that the economy has made progress towards its goals. Continue to provide support for the recovery policy, the US Federal Open Market Committee (FOMC) is still concerned about risks. Real GDP growth has slowed down significantly. Even if it reduces the scale of debt purchases, the Fed’s policies have provided strong support to the economy.
Demand has been very strong. As the new crown epidemic subsides, US economic growth should accelerate this quarter. Economic activities are constrained by supply constraints and bottlenecks. The pace of employment improvement has slowed down with the increase in new crown cases. It is expected that the economy will grow strongly this year, and the employment participation rate is still sluggish. It is difficult for employers to find suitable employees, which is an obstacle to labor supply. Should be reduced, the current unemployment rate overestimates the recovery of the labor market.
I believe that with the adjustment of the economy, the inflation rate will drop to close to the 2% target. Our policy tools cannot ease supply constraints. The future inflation problem is difficult to predict. The timing is still uncertain. The global supply chain will return to normal, but the time is uncertain, and the supply bottleneck lasts longer than expected.
The debt reduction plan will end in the middle of next year. The timing of the reduction has no direct signal significance for interest rate hikes. We are prepared to adjust the pace of bond purchases according to economic conditions. We are concerned about factors within our control. Our basic expectation is that the supply chain problem will continue until next year. Now is not the time to raise interest rates. If we need to respond, we will not hesitate. We are paying close attention to how the economy develops and will make adjustments accordingly. We can remain patient.
Regarding inflation and employment issues, Powell said that it will take time to maximize employment and may reach full employment next year. Wages have been rising strongly, and we have not seen disturbing wage increases. If wages rise above inflation and productivity growth, people will worry; but we have no evidence now. Inflation should fall in the second or third quarter of next year. The inflation we see is not caused by the tight labor market. The driving force for rising inflation is mainly related to factors related to the new crown epidemic. We must be aware of the risk of sharp price increases. . The labor force participation rate is expected to rise, and we must know what it means for many people to enter retirement. If we return to the path before the delta strain spread, we will make good progress.
We must be aware of the risk of weighing inflation and employment. We believe that higher inflation will continue, and we must take measures to deal with this risk. Monetary policy allows us to solve the problem, and if we have to change the pace of debt reduction, we will not surprise the market. The Fed is prepared to decide to accelerate or slow down asset purchases based on the outlook. Our current inflation level is completely inconsistent with price stability, and we will use our tools to control inflation in due course.
People have different definitions of the term "temporary". "Temporary" means that prices will not rise permanently. Over time, we will use policy tools to ensure that inflation does not become a permanent increase.
Wages are a key indicator of the tightness of the labor market. The economy is still affected by the COVID-19 pandemic, and we must remain humble about what we know about the economy. The delta strain has taken us on a different path. A balance must be struck between high inflation and job market issues. We must see the possibility of a recovery in the labor market only after the delta strain dissipates, and hope to see more clear prospects in the first half of next year. When we reach maximum employment, the inflation target is likely to have been reached. Obviously, the employment target has not reached the test for raising interest rates.
Powell pointed out that in many ways, we are all in a very tight labor market. The question is how long the labor market will last under the influence of the new crown epidemic. To maximize employment as a broad matter, we need to be prepared to take action when necessary. There is an upward risk of inflation. Shifting demand for commodities will reduce inflation. We hope to see this process in order to judge the true state of the economy. The economy seems to be ready for stronger employment.
It is believed that any role we play on climate issues is related to our existing tasks. Climate policy is determined by elected officials, and the Fed will not become the leader of climate policy.
We don’t think we are lagging behind the yield curve, there is still room for employment to grow, and economic data will dominate our policies. The current demand for further economic stimulus is far below the level when the quantitative easing was finally reduced in 2013. This time the debt reduction is earlier and faster than expected 6 months ago, and will return to the balance sheet problem in the next meeting. superior. No plans have been made for balance sheet issues after debt reduction. The Fed’s actions have been reported to the government and Congress. We are looking for ways to solve the liquidity problem by supplementing the leverage ratio. It is very important to have a well-liquid Treasury bond market.
The ethical system for conflicts of interest of Fed officials has existed for decades. It has played a good role, but the situation has changed. The Fed needs the trust of all Americans. The Fed has taken strong action against the stock trading behavior of Fed officials (Rosengren and Kaplan, etc.). Individuals will not guess whether their trading behavior is illegal. The Federal Reserve Attorney General is studying whether they violated those rules. It is too hasty to assess the damage to the Fed's image caused by their trading activities. It is necessary to do everything possible to ensure that no more Fed officials trade stocks (and cause conflicts of interest), and it is necessary to ensure that the stock trading system has more supervisory resources. The ethics and compliance of Fed officials varies among local Feds. So far, there has been a good start in dealing with transaction issues. Certain transactions are indeed not compliant.
Demand has been very strong. As the new crown epidemic subsides, US economic growth should accelerate this quarter. Economic activities are constrained by supply constraints and bottlenecks. The pace of employment improvement has slowed down with the increase in new crown cases. It is expected that the economy will grow strongly this year, and the employment participation rate is still sluggish. It is difficult for employers to find suitable employees, which is an obstacle to labor supply. Should be reduced, the current unemployment rate overestimates the recovery of the labor market.
I believe that with the adjustment of the economy, the inflation rate will drop to close to the 2% target. Our policy tools cannot ease supply constraints. The future inflation problem is difficult to predict. The timing is still uncertain. The global supply chain will return to normal, but the time is uncertain, and the supply bottleneck lasts longer than expected.
The debt reduction plan will end in the middle of next year. The timing of the reduction has no direct signal significance for interest rate hikes. We are prepared to adjust the pace of bond purchases according to economic conditions. We are concerned about factors within our control. Our basic expectation is that the supply chain problem will continue until next year. Now is not the time to raise interest rates. If we need to respond, we will not hesitate. We are paying close attention to how the economy develops and will make adjustments accordingly. We can remain patient.
Regarding inflation and employment issues, Powell said that it will take time to maximize employment and may reach full employment next year. Wages have been rising strongly, and we have not seen disturbing wage increases. If wages rise above inflation and productivity growth, people will worry; but we have no evidence now. Inflation should fall in the second or third quarter of next year. The inflation we see is not caused by the tight labor market. The driving force for rising inflation is mainly related to factors related to the new crown epidemic. We must be aware of the risk of sharp price increases. . The labor force participation rate is expected to rise, and we must know what it means for many people to enter retirement. If we return to the path before the delta strain spread, we will make good progress.
We must be aware of the risk of weighing inflation and employment. We believe that higher inflation will continue, and we must take measures to deal with this risk. Monetary policy allows us to solve the problem, and if we have to change the pace of debt reduction, we will not surprise the market. The Fed is prepared to decide to accelerate or slow down asset purchases based on the outlook. Our current inflation level is completely inconsistent with price stability, and we will use our tools to control inflation in due course.
People have different definitions of the term "temporary". "Temporary" means that prices will not rise permanently. Over time, we will use policy tools to ensure that inflation does not become a permanent increase.
Wages are a key indicator of the tightness of the labor market. The economy is still affected by the COVID-19 pandemic, and we must remain humble about what we know about the economy. The delta strain has taken us on a different path. A balance must be struck between high inflation and job market issues. We must see the possibility of a recovery in the labor market only after the delta strain dissipates, and hope to see more clear prospects in the first half of next year. When we reach maximum employment, the inflation target is likely to have been reached. Obviously, the employment target has not reached the test for raising interest rates.
Powell pointed out that in many ways, we are all in a very tight labor market. The question is how long the labor market will last under the influence of the new crown epidemic. To maximize employment as a broad matter, we need to be prepared to take action when necessary. There is an upward risk of inflation. Shifting demand for commodities will reduce inflation. We hope to see this process in order to judge the true state of the economy. The economy seems to be ready for stronger employment.
It is believed that any role we play on climate issues is related to our existing tasks. Climate policy is determined by elected officials, and the Fed will not become the leader of climate policy.
We don’t think we are lagging behind the yield curve, there is still room for employment to grow, and economic data will dominate our policies. The current demand for further economic stimulus is far below the level when the quantitative easing was finally reduced in 2013. This time the debt reduction is earlier and faster than expected 6 months ago, and will return to the balance sheet problem in the next meeting. superior. No plans have been made for balance sheet issues after debt reduction. The Fed’s actions have been reported to the government and Congress. We are looking for ways to solve the liquidity problem by supplementing the leverage ratio. It is very important to have a well-liquid Treasury bond market.
The ethical system for conflicts of interest of Fed officials has existed for decades. It has played a good role, but the situation has changed. The Fed needs the trust of all Americans. The Fed has taken strong action against the stock trading behavior of Fed officials (Rosengren and Kaplan, etc.). Individuals will not guess whether their trading behavior is illegal. The Federal Reserve Attorney General is studying whether they violated those rules. It is too hasty to assess the damage to the Fed's image caused by their trading activities. It is necessary to do everything possible to ensure that no more Fed officials trade stocks (and cause conflicts of interest), and it is necessary to ensure that the stock trading system has more supervisory resources. The ethics and compliance of Fed officials varies among local Feds. So far, there has been a good start in dealing with transaction issues. Certain transactions are indeed not compliant.
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