Jay Powell stressed the importance of a “patiently accommodating” monetary policy to support the struggling The US job market, warns that full employment in the world’s largest economy will not be easy to achieve.
In prepared remarks to the New York Economic Club on Wednesday, the chairman of the Federal Reserve said employment in the United States was far from its level before the pandemic level. He revealed no fear of one increase in inflation later this year triggered by President Joe Biden’s $ 1.9 tonne fiscal stimulus plan.
“Despite the surprising rate of recovery early on, we are still very far from a strong labor market whose benefits are widely shared,” Powell said. “Employment in January this year was almost 10 meters below the level in February 2020, which is a greater shortfall than the worst of the great recession demand. ”
Powell also said U.S. politicians, including health officials, tax officials and central bankers, would still have plenty of work to do to close this gap, suggesting the Fed did not see a quick end in sight of the economic downturn triggered by the pandemic.
“Experience tells us that it will not be easy to get to and stay in full employment,” Powell said. “Policies ending the pandemic as soon as possible are paramount,” including more fiscal stimulus.
“Workers and households struggling to find their place in the post-pandemic economy are likely to need continued support. The same goes for many small businesses that are likely to thrive again when the pandemic is behind us, ”he said.
Powell reaffirmed ultra-dovish monetary policy pursued by the Fed, which means waiting for the US to reach full employment and for inflation to rise above 2 percent for some time before tightening.
“Also important is a patiently accommodating monetary policy stance that includes the experience of the past – especially on the labor market and the economy more generally,” he said.
The Fed chairman then made a broader appeal, including to business and government, to help revive the U.S. job market after the pandemic.
“Given the number of people who have lost their jobs and the likelihood that some will struggle to find work in the post-pandemic economy, achieving and maintaining maximum employment will require more than supportive monetary policy,” Powell said.
“It will require a community-wide commitment with contributions from the entire government and the private sector. The potential benefits of investing in our country’s workforce are enormous. ”
Powell’s comments follow a energetic debate among economists and senior officials about whether Biden’s fiscal stimulus plan could possibly trigger an unwelcome rise in inflation as it pulls the recovery this year. Fed officials have it though shrugged his shoulders such concerns.
Investors have begun to praise higher inflation later in the year, but few fear a destabilizing resurgence. Since November, market targets for inflation expectations have risen steadily. A measure derived from US inflation-protected government securities, the 10-year break-even rate, is now above 2 percent. It crumbled about 1.7 percent in October.
Expectations of further public spending and, in turn, stronger growth have also pushed long-term government interest rates higher. On Monday, the 30-year bond traded above 2 percent for the first time since February last year.
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