In an interview with NPR on Thursday evening Beijing Time, Federal Reserve Chairman Jerome Powell expressed his views on the current U.S. economy and Federal Reserve policy.
Powell said that the Fed will reduce bond purchases as the economy makes substantial progress toward recovery and goals. The Fed told banks that it is not the Fed’s job to tell them which legitimate businesses can lend or not lend.
After Powell made these statements, spot Gold moved slightly lower to below $1,730, and spot silver extended its intra-day decline to 2%. Gold and silver rebounded after the U.S. market opened, with spot gold at $1,740 per ounce and spot silver back at $25 per ounce.
The 10-year U.S. bond yield, on the other hand, fluctuated up and down around 1.6%.
Powell also said the Fed is firmly committed to maintaining Inflation at an average of 2%. The U.S. economy is receiving substantial financial support, and the Fed’s upward revision of its economic forecast reflects financial assistance.
Richmond Fed President Balkin later also said the U.S. economy could see above-trend growth for some time, not just 2021, given the level of economic stimulus and suppressed demand. The Fed is likely to see “substantial further progress” on its employment and inflation targets this year, with inflation expected to rise “outright” and strong job growth expected in the coming months.
On the debt issue, Powell said it is not the time to focus on fiscal sustainability. The U.S. government’s debt level is not unsustainable, but the path of the debt is sustainable.
He also addressed the climate issue, with Powell stating that
Climate change is an important issue that we will be dealing with for a long time and has significant economic implications. The Fed does have a role to play in climate, which is a small but important set of responsibilities around bank regulation.
When asked about diversity within the Fed, he said they are not at all happy with the results of their diversity efforts.
Fed Vice Chairman Clarida also spoke more optimistically, saying he expects inflation to temporarily exceed 2% this year and does not believe that this year’s fiscal support will bring long-term upside risks to inflation, which will return to 2% or slightly above in 2022 or 2023. Clarida also sees much lower downside risk to the economy, which is currently weak, but the impact of fiscal support will diminish over time.
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