The U.S. Federal Reserve has no inclination to take its foot off the monetary gas pedal, even as housing and stock markets race ahead, the head of the bank said.
The central bank wants to see much more progress towards its goal of restoring millions of jobs lost in the pandemic, Federal Reserve Chair Jerome Powell told members of the Senate Banking Committee in a hearing Tuesday.
The Fed will “keep monetary policy accommodative to do what we can to speed the recovery so that it will be as robust and complete as possible, as soon as possible,” Powell said.
The economy is still employing 10 million fewer people than it did before the pandemic hit. It has also seen anemic growth, with a monthly average of just 29,000 jobs created in each of the three months through January. Additionally, recent unemployment statistics have shown joblessness remains stubbornly elevated even as COVID-19 cases decline. As a result, the central bank will continue to wield its main tools of encouraging spending — near-zero federal funds rate, and aggressive purchases of securities.
Powell’s comments came as Democrats in Congress work to pass a $1.9 trillion pandemic relief bill to help those who have been hit hardest by the pandemic and to jumpstart economic growth.
The stimulus bill prompted an exchange at the hearing between Powell, who has not taken a public position on it, and Louisiana Republican John Kennedy:“If we don’t pass the bill, you’re cool with that?” Kennedy asked. “That would be expressing an opinion. So that’s what I’m not doing, is expressing an opinion,” Powell said.“Well, would you be uncool with that?” Kennedy said. “I think by being either cool or uncool, I would have to be expressing an opinion,” Powell replied.
That stimulus proposal is prompting a swath of the population to see portfolios soar as stock markets rally, prompting an uneven recovery that is also seeing higher-income jobs recover faster than lower-income positions, the hardest hit over the past year.
“In recent weeks, the number of new cases and hospitalizations has been falling, and ongoing vaccinations offer hope for a return to more normal conditions later this year,” Powell said in prepared remarks. “However, the economic recovery remains uneven and far from complete, and the path ahead is highly uncertain.”
There have been growing concerns amid politicians and economists that the Fed's actions will drive inflation higher, but Powell brushed them off in the hearing, as he has been doing for weeks.