Jay Powell says US economy is at an ‘inflection point’
Jay Powell said the US economy is at an “inflection point” with growth and hiring set to accelerate, but he warned that new surges of Covid-19 could impede the recovery.
Speaking on CBS’s 60 Minutes programme, the chair of the Federal Reserve delivered an upbeat message about the economic outlook and underscored the critical importance of the ongoing vaccinations campaign and the massive stimulus measures enacted to date to maintain its momentum.
“We feel like we're at a place where the economy's about to start growing much more quickly and job creation coming in much more quickly,” he said in the interview, which was conducted on Wednesday and aired on Sunday.
“What we're seeing now is really an economy that seems to be at an inflection point, and that's because of widespread vaccination and strong fiscal support, strong monetary policy support,” Powell added, saying the economy would have been “so much worse” without the aid.
“Congress, in effect, replaced people's income . . . it was heroic and it really made the difference,” he said.
The US vaccine programme has been one of the fastest in the world, with a record 4.6m doses having been administered on Saturday, according to data from Bloomberg. Doctors hope that enough vaccines will soon have been delivered to slow the spread of the disease and crush the number of cases, as has started to happen in Israel and the UK.
In the short term, however, Biden administration officials are concerned about the spread of the disease in some states such as Michigan, where daily case numbers recently approached record highs as unvaccinated young people begin to socialise more and catch the virus.
Powell also reiterated on Sunday that the brightening economic outlook hinges primarily on keeping Covid-19 under control.
“The principal risk to our economy right now really is that the disease would spread again,” he warned. “It's going to be smart if people can continue to socially distance and wear masks.”
Fed officials have so far maintained that, despite the vastly improving outlook for growth and inflation, the US economy has yet to fully recover. While March’s jobs report showed strong gains, the unemployment rate is still elevated at 6 per cent, and there are roughly 8m fewer jobs than before the coronavirus crisis struck.
Minutes from the central bank’s most recent meeting on monetary policy, published last week, also made clear that the Fed has no intention of pulling back its ultra-accommodative monetary policy any time soon. Officials stressed that it would be “some time until substantial further progress” was made on its goals for full employment and inflation that averages 2 per cent over time.
As such, they indicated no plans to adjust the current $120bn monthly asset purchase programme, nor any intention to raise interest rates until at least 2024, as their current forecasts suggest.
Powell reiterated this commitment on Sunday, highlighting the “disparate” nature of a recovery in which certain segments of the economy have flourished again while others, especially in the travel and entertainment space, continue to suffer.
“It's just a very unusual recovery,” he said. “We're not going to forget those people who were left on the beach really without jobs as this expansion continues. We're going to continue to support the economy until recovery is really complete.”
Powell also weighed in on the implosion of Archegos Capital Management, the family office whose derivatives trades are now the subject of regulatory scrutiny after several large banks reported billions of dollars of losses tied to those positions.
“This incident doesn't really raise questions about the stability of the financial system or of those institutions, which are mostly foreign banks,” he said. “What's concerning about it though is . . . that a single customer . . . of one of these large firms could result in such substantial losses to these large firms in a business that is generally thought to present relatively well understood risks.”
“What we try to do is make sure that the banks understand the risks that they're running and have systems in place to manage them,” Powell added. “This would appear to be a significant shortfall — a failure on that front.”
Colby Smith in New York and Kiran Stacey in Washington