According to Federal Reserve Chair Jerome Powell, the US economy is at an “inflection point,” with hopes that inflation and hiring could ramp up in the months ahead, but also risks, if a hasty reopening, leads to a continuing uptick in coronavirus cases. Powell reiterated both his recent optimism regarding the economy and a now-familiar message that the COVID-19 pandemic has not yet been entirely overcome in an interview on CBS news magazine “60 Minutes” that aired on Sunday night.
“There are dangers in the world. And the other one is that we’ll reopen too soon, people will revert to their old habits too early, and we’ll see another surge in cases “Powell said this in an interview that was taped on Wednesday. Because of the impact of vaccines, any future increase in cases may be less serious and with less negative consequences for public health and the economy than previous spikes. However, Powell said that the economy would “rock forward more rapidly to the degree we hold COVID under pressure.”
“It’ll be wise if people can maintain their social isolation and masks.” Chairs of the United States Federal Reserve feature on widely-televised broadcast shows such as “60 Minutes” only infrequently, though Powell has used that sort of exposure many times since the pandemic, in order to justify Fed policies and, at first, to attempt to ease concerns of a full-fledged economic crisis. A year later, the economy’s data has largely been optimistic, with a better-than-expected 916,000 jobs added in March, and some Fed officials predicting a streak of a million new jobs per month later this year.
Powell said that the base case outlook for job growth in the months ahead is “very good,” and that “fast progress to full jobs” is “in the realm of possibility” for the United States. Many hardest hit by the pandemic, such as low-wage service employees, will see their employment return relatively quickly in the coming months, as more and more operations are deemed safe to resume, according to Powell.
Powell, on the other hand, maintained that the Fed’s new stance of near-zero interest rates and $120 billion in monthly bond purchases would not be changed. Officials want to continue supporting the economy until it is largely recovered, and “hang with those people to help them while they struggle to get back to where they were in life, which was working.”
While COVID-19 cases are on the rise in some parts of the country, especially in Michigan, infection rates are at multi-month lows across the country, and the vaccine rollout continues apace, with a one-day total of 4.6 million doses issued on Saturday, according to a Reuters tracker. As a result, large swaths of the market have been able to completely restart. In recent weeks, activity in the hardest-hit leisure and entertainment industries has increased dramatically, as customers recover interest in going out to eat and flying again.
Despite the large rise in employment in March, the work market is only 8.4 million workers short of where it was in February 2020, right before the pandemic caused a historic slump, and much more short of where it would be today if the pandemic had never happened.
A new Fed policy emphasises job growth and has provisions for inflation to rise past the central bank’s 2% goal for a period of time without the Fed trying to bring it back down. Powell distinguished between the Fed’s intention to allow inflation to rise “moderately” above its 2% goal and something higher. Powell said, “We don’t want inflation to rise materially above 2% and return to…the grim, old inflation days” of the 1970s. Powell recently stated that a recent increase in inflation readings is likely to be temporary and would not require the Fed to adjust its monetary policy plans.
