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Powell Calls for Patient Stimulus Approach to Keep Recovery Alive

Economy Feb 10, 2021 03:28PM ET
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© Reuters.

By Yasin Ebrahim

Investing.com - Federal Reserve Chairman Jerome Powell said Wednesday, a "patiently accommodative monetary policy stance" is important to boost the labor market and the overall economy following a stall in recent months.  

"Also important is a patiently accommodative monetary policy stance that embraces the lessons of the past—about the labor market in particular and the economy more generally," Powell said Wednesday to the Economic Club of New York on the "State of the U.S. Labor Market."

The U.S. central bank chief, citing the Fed's Statement on Longer-Run Goals and Monetary Policy Strategy, reiterated that a strong labor market would not solely be a trigger to tighten monetary policy as full employment, part of the Fed's dual mandate, was unlikely to cause an unwanted increase in inflation.

"Recognizing the economy's ability to sustain a robust job market without causing an unwanted increase in inflation, the statement says that our policy decisions will be informed by our 'assessments of the shortfalls of employment from its maximum level' rather than by 'deviations from its maximum level,' Powell said . "This means that we will not tighten monetary policy solely in response to a strong labor market."

 
"As reading from March in April last year fall out of the 12 month window, we'll probably see an increase in [inflation] readings, ... but that won't be very large, or persistent in all likelihood," Powell said. "We also may see, as the economy reopens, a burst of spending as there's quite a lot of savings on people's balance sheet," leading to some pressure on prices.
 
The Fed chairman said the ballooning U.S. deficit was not an immediate concern to the central bank at a time when millions remain unemployed. 
 
"[W]e're a long way from the situation where we would have to take into account the government's ability to finance itself ...  We will continue to set to best achieve maximum employment and price stability. Federal budgetary issues, do not play a role in our deliberations"
 
Some market participants have recently echoed Powell's sentiment on inflation, expecting the central bank to maintain its status quo on policy as it is unlikely the immediate U.S. economic backdrop, which is at the beginning of a recovery, will change rapidly to trigger the Fed into action.   
 
"If they [the fed] are at the point where they're changing their tune ... It's probably because you either see huge inflationary pressure, which is [unlikely to occur] anytime soon, or they see the economy overheating, which is also hard to see right now when we're starting to see the beginning of the recovery," Johan Grahn, Head of ETF Strategy at Allianz Investment Management said in an interview with Investing.com.
 
"I don't foresee that they [the Fed] are going to change their tune, but if they do, they will be very careful in terms of signalling ... and the market will have a time to reprice accordingly," Grahn added.
Powell Calls for Patient Stimulus Approach to Keep Recovery Alive
 

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Comments (27)
Ron Raymond
Ron Raymond Feb 11, 2021 5:56AM ET
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Unbekownst to Powell, he is destroying the US and setting the path to starvation, the rich and the poor and worsee. Worthless currency and $29 dpllar loaves of bread will be seen before we know it and he will say the same *** he knows we are in serios trouble being an old trader himself, but will leave his position and blame it on the next guy I suppose. I fear for our kids when guys like Powell are in charge. Not sure many see the big pictue, billionaires gettting richer and ready at will to dump the market and leave most withoutt retirement money and the government new monetary policy will result in the majority of poor slaving and bathing in highest taxes ever. My estimates there will be total collaspe of this country before 2035 if not much before.
Art Fire
Art Fire Feb 11, 2021 1:08AM ET
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Just get the vaccines out. That's it. Get those out and people can work again, we can restore the jobs.
Chris Sundo
Chris Sundo Feb 10, 2021 11:27PM ET
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'..to keep the recovery alive..' __ nice thinking. Although idk what recovery Powell is talking about. Maybe the recovery in stock prices, from below par to above par .. LOL
John Thompson
John Thompson Feb 10, 2021 10:22PM ET
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If these central banksters stop printing and revert to the norm the whole thing crashes these guys and gals better go back to school and study inflationary economics where billionaires become penniless overnight viz the dollar will turn into the zim dollar hahaha
Silver Bull
Silver Bull Feb 10, 2021 8:45PM ET
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These crooks now sending out stimulus checks will bring inflation. Keep staying poor peasants it’s all going according to plan.
Kanok The Great
Kanok The Great Feb 10, 2021 8:00PM ET
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Powell can hv a very dizzy way to speak but CPI MOM 0% & M2 velocity of Q4/20 of 1.129 imply bad reading for business activity.
pavel zissu
pavel zissu Feb 10, 2021 7:47PM ET
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You The Government told me in March 2020bto stay home do not go to work...and I did. Now my business is dead so...you have to pay me, every month, until my business is back. If is in June or October 2021 or May 2022, you The Government you have to pay me every single month.
Chris Sundo
Chris Sundo Feb 10, 2021 7:47PM ET
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That's what they do in germany, pavel. It's a frozen economy there. A pretty good concept in wave 3 covid land, dont u think?
Mike Chen
Mike Chen Feb 10, 2021 7:02PM ET
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Stop working and grab your money in the casino stock market. Wallstreetbets is invincible!
David Smith
David Smith Feb 10, 2021 6:39PM ET
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Printing money will only keep unemployment high. They are simply wrecking the USD.
Steve Lora
Steve Lora Feb 10, 2021 6:24PM ET
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Where's my $2000?
 
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