Economy Is Showing Sustained Progress, Powell Says
Federal Reserve Chairman Jerome Powell said Monday that job growth should pick up in coming months and temporary inflation pressures should ease as the economy continues to recover from the effects of the pandemic.
“The economy has shown sustained improvement,” Mr. Powell said in testimony prepared for delivery Tuesday on Capitol Hill, noting progress on vaccinations and vast stimulus efforts by Congress and the Fed.
Mr. Powell is set to appear before the House Subcommittee on the Coronavirus Crisis to discuss the Fed’s efforts to shore up the economy since the start of the pandemic.
The hearing aims to focus on lessons learned by the Fed, which rolled out a blitz of extraordinary lending programs early in the health crisis. These included efforts to calm market turmoil, suppress borrowing costs and lend money directly to some businesses and local governments. The programs wound down at the end of 2020.
Mr. Powell said the lending programs “helped unlock more than $2 trillion of funding” that reduced job losses at businesses, nonprofits and local governments.
He also is likely to field questions on the Fed’s monetary policies, which aim to support the economic recovery.
The Fed has held its key overnight rate near zero since March 2020 and has been buying $120 billion of Treasury and mortgage bonds since June 2020.
Mr. Powell’s remarks Monday largely echoed his comments at a press conference last week following a policy meeting at which Fed officials signaled they anticipate raising interest rates sooner than previously expected amid a strengthening recovery and higher inflation.
They indicated they expect to raise the Fed’s overnight federal-funds rate, by half a percentage point by the end of 2023. They also began preliminary deliberations to eventually scale back the pace of bond purchases.
The bond purchases are aimed at holding down longer-term interest rates to encourage American consumers and businesses to borrow and spend.
While economic output is poised to grow this year at the fastest pace in decades, Mr. Powell said in his remarks for Tuesday, the labor market is improving at an uneven pace.
“Job gains should pick up in coming months as vaccinations rise, easing some of the pandemic-related factors currently weighing them down,” Mr. Powell said. He added that a recent uptick in inflation should similarly ease as pandemic-related supply bottlenecks fade.
Mr. Powell cautioned that the pandemic remains a risk to the economy, as vaccination rates have slowed and new strains of the virus are emerging.
“Continued progress on vaccinations will support a return to more normal economic conditions,” he said.