Fed Chairman Jerome Powell said at a press conference that the dangers facing the U.S. economy were clear a year ago. The Fed is strongly committed to meeting its (Inflation and employment) policy goals.
He reiterated that the Fed will provide economic support whenever necessary. Some of the worst economic consequences have been avoided, and the FOMC’s GDP expectations have been revised significantly higher.
But no one should be complacent, and the trajectory of the economy (recovery) will depend greatly on the new crown pneumonia outbreak. The labor force participation rate remains below pre-Epidemic levels.
He said the Fed needs to see actual inflation, rather than “expected to exceed the 2% target”, before turning on tightening policy.
He also admitted that in the coming months, inflation will rise compared to the same period in 2020, but those one-off price increases will have a temporary impact on overall inflation, which will not be enough to ensure that the Fed raises interest rates.
Bank of America has said that the FOMC meeting will be “one of the most important events for the Fed in some Time. The Fed needs to balance the improving economic outlook and will not soon change the easing policy and justify the current policy, “a tricky exchange”.
Rick Rieder, chief investment officer of BlackRock’s global fixed income business, said recently that whatever Powell says at the conference will move markets. He expects the U.S. 10-year Treasury yield to continue to move higher during the year, possibly hitting 2%.
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