Federal Reserve Chairman Jerome Powell. (Photo Bloomberg)
Federal Reserve Chairman Jerome Powell told the Senate Banking Committee on Tuesday that the economic recovery "remains uneven and far from complete," and the job of the Fed to support it will not be finished until the pandemic is under control.
"Once we get this pandemic under control, we could be getting through this much more quickly than we had feared. … It's not done yet. The job is not done. … That's the thing I keep coming back to. We've got to get the pandemic under control so the U.S. economy can reopen," Powell said.
In the meantime, the Federal Reserve will continue to purchase $120 billion in Treasurys and mortgage-backed securities every month and maintain near-zero short-term interest rates, according to Powell. He said the Fed will "clearly communicate" any changes in its assessment of the economic progress "well in advance of any change in the pace of purchases."
Powell noted that 10 million more Americans are unemployed today than were before the pandemic hit, just over a year ago, and job creation has increased at an average monthly rate of "only 29,000" over the three months ending in January. The national unemployment rate was 6.3% in January — less than half the record 14.7% reached in April — but it tops 20% among the bottom quartile of income earners, Powell said. "There's a long way to go."
When asked by senators about the Fed's outlook for inflation, Powell said inflation will pick up because of the "base effects" of comparing current rates with those of a year ago, but that will be temporary. Even a substantial pickup in spending in the second half of the year, which many expect, is not likely to result in large or persistent increases in inflation, Powell said.
