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The United States’ economy is poised for an extended period of strong growth and hiring, according to the chair of the Federal Reserve in an interview broadcast Sunday, though the coronavirus remains a risk.
In an interview with CBS’ “60 Minutes,” Chair Jerome Powell also stated that he does not expect the Fed’s benchmark interest rate, which is currently near zero, to be raised this year. In addition, he downplayed the risk of higher inflation as a result of sharp increases in government spending and growing budget deficits.
“We feel like we’re at a point where the economy is about to start growing much faster and job creation is going to pick up much faster,” Powell said. “The growth that we anticipate in the second half of this year will be very strong. And I expect job creation to be very strong.”
Powell stated in the extensive interview that the Fed is closely studying the development of a digital dollar but has not yet made a decision on whether to proceed. Powell stated last month that the central bank would not issue digital currency unless Congress approved it.
“Powell noted that roughly a million jobs were added in March when revisions to jobs data from January and February are factored in. The unemployment rate fell to 6% from 6.2 percent.
“We would like to see a string of months like that,” he said. “That is certainly a possibility.”
Nonetheless, there are approximately 8.4 million fewer jobs than before the pandemic, and Powell admitted that he frequently sees a homeless encampment near the Fed’s headquarters in Washington.
“There is still a lot of pain out there, “he stated. “And I believe it is critical that we, as a country, stay and assist those in need. The economy we return to will be different from the one we had.”
Powell also stated that the primary risk to the economy is a pandemic and a breakdown in the precautions that Americans have largely taken over the past year.
The risk, he says, is that “we will reopen too soon, people will return to their old practises, and we will see another spike in cases.” “The economy should grow. But it can move faster if we keep COVID spread under control.”
Separately, House Speaker Nancy Pelosi was asked on Sunday if Powell’s positive remarks about the economy indicated that more government assistance, such as President Joe Biden’s $2.3 trillion infrastructure plan, was no longer needed.
Pelosi said emphatically, “No.” “In reality, if you pay attention to what he said, you’ll notice that we’ve arrived at a point where we’ll ‘begin to see.’… After that, he warns of a virus outbreak. We must eradicate the virus if we are to expand the economy confidently.”
Powell also stressed on “60 Minutes” that the recovery in the United States is still extremely unequal, with the unemployment rate among the lowest-paid one-quarter of Americans still hovering about 20%, with the difference affecting African Americans and Hispanics the most.
The Fed chair also reaffirmed the central bank’s criteria for increasing the short-term rate: a completely healed labour market, with virtually everybody who wants a job being able to find one, and inflation at 2% and on track to stay “moderately above 2% for some time.”
Some analysts are concerned about a possible spike in inflation as a result of the Biden administration’s infrastructure initiative, which comes after Congress approved a $1.9 trillion rescue package last month. “And inflation didn’t really respond to that,” Powell said, referring to the large government deficits that followed the financial crisis of 2008-2009.
“When the economy is solid, we’re completely restored, people are employed, and taxes are coming in, that’s the time to do that,” he said. “Now is not the time to do that.”
The Fed chair also said that his work is “the same” under Biden as it was under Trump. Trump, on the other hand, has regularly chastised and insulted Powell on Twitter, while Biden barely mentions Powell and confirmed last week that he has yet to meet with him in person. Powell’s term as chair is set to expire next year.
Powell said, “I’m reluctant to comment — even indirectly — on elected officials.” “I’ve always done it that way, and I’ve never regretted it.”
