Get 40% Off
🚨 Volatile Markets? Find Hidden Gems for Serious OutperformanceFind Stocks Now

Is Fed Chair Powell 'cool' with more fiscal aid? Suddenly he won't say

Published 02/23/2021, 04:05 PM
Updated 02/23/2021, 04:30 PM
© Reuters. FILE PHOTO: Chairman of the Federal Reserve Jerome Powell listens during a Senate Banking Committee hearing in Washington

By Ann Saphir

(Reuters) - With a heated political debate underway over the Biden administration's $1.9 trillion proposed pandemic relief package, it was entirely predictable that U.S. lawmakers would jump at the chance to ask Federal Reserve Chair Jerome Powell to weigh in.

But in contrast with his repeated calls last year for additional fiscal support and the dire consequences of skipping it, Powell declined to do so on Tuesday during the first of two days of congressional testimony.

"I have consistently not taken a position on this bill," Powell told Republican Senator John Kennedy. "It's not appropriate for the Fed to be playing a role in these fiscal discussions about particular provisions and particular laws...it's not our role."

Kennedy pressed: "If we don't pass the bill, you're cool with that?"

"That would be expressing an opinion. So that's what I'm not doing, is expressing an opinion," Powell answered, a response reminiscent of the kind of cryptic volley offered up by former Fed Chair Alan Greenspan during congressional testimony. "By being either cool or uncool, I would have to be expressing an opinion."

It was unclear if Powell's studied objectivity on the issue reflected any change of heart on the issue. The economy, he said several times, is a "long way" from health and needs further support.

"I would interpret it as a simple reaction to the fact that a big package is on the way," says Julia Coronado, president of analysis firm Macropolicy Perspectives.

Indeed, she said, Powell's forecast Tuesday that the U.S. economy may grow in the range of 6% this year "100%" means he is already penciling in the additional fiscal aid.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

The U.S. House of Representatives Budget Committee on Monday approved the relief package, advancing it toward a full House vote in coming days and, eventually, toward consideration in the Senate, where Democrats hold a slim majority.

Last year, as Congress and the Trump administration repeatedly failed to move forward on fiscal relief, Powell struck a decidedly different tone.

In October, for instance, Powell told a group of business economists that "the recovery will be stronger and move faster if monetary policy and fiscal policy continue to work side by side to provide support to the economy until it is clearly out of the woods."

And in December, as lawmakers appeared close to what ultimately was a $892 billion aid package, Powell went further. "The case for fiscal policy right now is, is very, very strong," he said in a news conference. While the details are "up to Congress," he said, the need for households and businesses to have fiscal support is "widely understood."

"I certainly would welcome the work that Congress is doing right now," he said then.

On Tuesday, however, Powell declined more than once to comment on the current bill.

But he did make it clear that if the government does choose to deliver a "burst" of fiscal support, he would not expect to see a surge in unwanted inflation.

The second half of the year is likely to be "very good" and stronger consumer spending could push up prices, he said - but he would expect that effect to be neither large nor persistent.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Latest comments

increase M2 but cannot stop jobless simple imply inflation not GPD recover. Powell knows this eqation well.
CONSIDER: PAYING our debts ??
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.