NEW YORK: Federal Reserve chair Jerome Powell says the US economy is at an “inflection point” with stronger growth and hiring ahead thanks to rising vaccinations and powerful policy support, but Covid-19 remains a threat.
“We feel like we’re at a place where the economy is about to start growing much more quickly and job creation coming in much more quickly, ” Powell told CBS’s “60 Minutes” in an interview conducted Wednesday, according to a transcript of the interview that aired Sunday.
“The outlook has brightened substantially. And that’s the base case. I would say again though, there really are risks out there, ” he said.
“The principal risk to our economy right now really is that the disease would spread again. It’s going to be smart if people could continue to socially distance and wear masks.”
The Fed chair was asked about other risks to the economy or financial system.
The recent collapse of private hedge fund Archegos Capital Management caused massive losses and spurred financial market volatility.
Powell said the incident didn’t raise questions about stability of the financial system or of those institutions that took a hit, though it was “concerning” that a single client could cause so much damage.
“We’re determined to understand what happened and make sure that whatever happened doesn’t happen again, ” he said.
Powell said regulators are probing why bank risk-management systems appear to have failed.
“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, ” he said.
“This would appear to be a significant shortfall – a failure on that front. And so that’s something we’re looking at.”
More than a year into the global pandemic, Fed officials have repeatedly stressed that the US economy continues to need aggressive monetary policy support as it recovers from the pandemic, even as the outlook brightens amid widening vaccinations.
That dovish view has helped power US stocks to fresh record highs as investors shrug off inflation concerns amid powerful aid from Washington.
Their latest forecasts show officials don’t expect to raise interest rates from near zero before the end of 2023, even as they sharply upgraded projections for growth and employment this year. Some investors have bet it will act sooner.
Powell declined to put a date on it but said it was “highly unlikely we would raise rates anything like this year.”
“The Fed will do everything we can to support the economy for as long as it takes to complete the recovery, ” he said, noting many Americans have left the workforce during the pandemic – which means they are not included in the unemployment rate – and “we need to see those people coming back into the labour force.” — Bloomberg