WASHINGTON (Reuters) – Federal Reserve Chair Jerome Powell will appear in Congress on Tuesday to provide lawmakers an update on an economy still reeling from the pandemic but perhaps poised to take off later this year if the U.S. vaccination program hits its stride.
The hearing before the Senate Banking Committee, one of the Fed chief’s mandated twice-a-year appearances on Capitol Hill, is scheduled to begin at 10 a.m. EST (1400 GMT) and will be Powell’s first since Democrats won the White House and control of both chambers of Congress.
It is likely to focus on the tension between a pandemic that has claimed more than half a million U.S. lives and left millions unemployed, and an economy flush with savings and central bank support, and about to get a fresh gusher of federal spending.
The growing likelihood that Congress will pass President Joe Biden’s $1.9 trillion stimulus plan has raised concerns about a possible spike in inflation and overheating in asset markets, but Powell’s message to lawmakers will likely be a familiar one: don’t let off the gas.
Even with Americans being vaccinated at a rate of more than 1.5 million a day and coronavirus caseloads dropping, Powell and his fellow Fed policymakers are focused instead on the nearly 10 million jobs missing from the economy compared to a year ago, and the potent risks still posed by the virus.
They’ve pledged to keep interest rates low and use other monetary policy tools to speed up a labor market recovery. Two weeks ago, Powell pushed for a “society-wide commitment” to that goal – a nudge to lawmakers debating Biden’s stimulus plan.
The scale of the proposed stimulus, coming on the heels of about $4 trillion in federal aid and heavy bond purchases by the Fed last year, has flustered the feathers of inflation hawks and stoked criticism that the U.S. central bank has boosted prices of stocks and other assets to unsustainable levels.
Fed officials are united on that front. They don’t think inflation is a risk, and regard much of the recent rise in stock prices, for example, as a sign of markets’ confidence in a post-pandemic economic rebound, not an artificial run-up fueled by cheap money.
The hearing on Tuesday, which will be followed by Powell’s appearance before the House of Representatives Financial Services Committee on Wednesday, may also provide a gauge of his prospects of remaining Fed chief when his current four-year term expires early next year.
Biden will have to decide in coming months whether to reappoint Powell, who was chosen for the job by former President Donald Trump. The nomination is subject to Senate ratification.
Source: Economy - investing.com
