Powell: monetary policy is one of the factors that led to the rise in house prices

At 21:30 on Thursday, Fed Chairman Jerome Powell makes a testimony statement before the Senate Banking Committee on the semi-annual monetary policy report. He said that inflation is well above 2%, but in some ways higher inflation is temporary, and that policy will remain accommodative for quite some time, and that U.S. debt and home mortgage-backed securities purchases will be discussed in the coming weeks.

Spot gold was little volatile during the speech, oscillating around $1822.

Powell promised at a hearing yesterday (Wednesday) to provide “strong support” for the U.S. economy’s recovery from the epidemic, suggesting that he sees no need to push the Fed to withdraw support for the U.S. economy, even with the recent spike in inflation. After Powell’s dovish testimony, the market is widely expected to still have more dovish remarks, and there will be no hint of tapering asset purchases in the near future.

On financial regulation, Powell said that the Fed’s financial institutions are well capitalized and have been maintaining strict stress tests on financial regulation, and will be prepared to deploy countercyclical capital buffers if needed. He mentioned that the Fed will work on the Community Reinvestment Act (CRA), arguing that the level of capital for the financial system to absorb losses is correct. It has not yet been decided whether the benefits of a central bank digital currency outweigh the disadvantages, and it is hoped that Congress will support a central bank digital currency.

On the housing market, Powell pointed out that there is little difference in the impact of the purchase of Treasury bonds and home mortgage-backed securities on the housing market, and that monetary policy is one of the factors leading to the rise in house prices.

On inflation, Powell said the challenge for the Fed is how to respond to higher than expected inflation, which is well above 2%, and is monitoring whether inflation is temporary or continues to rise.

St. Louis Fed President Bullard spoke earlier today (Thursday), saying that the U.S. economy will be “quite strong” in the coming years and that controlling inflation expectations is a challenge. Among them, part of the rise in inflation is temporary, part of the rise in inflation may continue until 2022.

Therefore, Bullard said.

“The Fed should remain flexible in tapering its bond purchases and it is time to end these emergency measures.”

On the job market, the U.S. initial jobless claims for the week to July 10 released at 20:30 recorded 360,000, renewing a new low since the week of March 14 last year, and the data was in line with expectations. Some agencies analyzed that layoffs are easing as the business environment improves and companies increase hiring, businesses are back up and running, and demand for travel and leisure is surging.

Even so, the data is still above pre-outbreak levels, and employers continue to report difficulty finding qualified workers, which could hinder the pace of labor market recovery.