The shares of large technology companies began the session on Wall Street with falls on Tuesday, in a market worried about the possible rise in interest rates on US Treasury bonds and awaiting Jerome’s appearance before Congress Powell, Chairman of the Federal Reserve (Fed). Cautious but optimistic, Powell reassured everyone by ruling out that inflation constitutes a major threat to the US economy when it begins its recovery, back in the second half of the year, and reiterated that the central bank plans to maintain its growth-promoting policies , with interest rates close to zero and massive purchase of bonds.
In his hearing before the Senate Banking Committee to present his semi-annual monetary policy report, Powell stated: “The pandemic has left a significant mark on inflation. For some of the sectors that have been most severely affected, prices remain particularly weak. In general, and in the accumulated of the last 12 months, inflation continues to be below our objective of 2% in the long term ”.
The economic recovery is uneven and is far from complete, the Fed chairman reiterated, citing the example of the labor market to illustrate the inconsistency of the improvement. “Although much progress has been made in the job market, there are still millions of Americans unemployed,” he recalled; “The road ahead continues to be considerably uncertain.”
Unemployment has corrected its upward trend after increasing dramatically last year due to the total or partial closure of economic activity, but the official unemployment rate, 6.3%, is still double that registered in February 2020 (3.5%), with a negative record of 14.7% in April, corresponding to the incidence of the first wave and the different confinements decreed by the States. In the last quarter of last year it remained close to 7%, indicating stagnation.
The market, meanwhile, begins to notice the incipient consumer confidence, with a perceptible increase in spending, but other sectors continue to be weighed down by the paralysis derived from the pandemic. Construction and industry activity continues to pull the economy. The latest central bank forecasts point to growth of 4.2% this year, after the 2.4% drop recorded last year.
When a year of the Fed’s stimulus policy is about to end, which has kept the price of money at almost 0% in recent months, plus the monthly purchase of debt amounting to 120,000 million dollars, Powell was slightly optimistic, without abandoning his traditional caution. “Although we should not underestimate the challenges ahead, the facts point to an improvement in the outlook for later in the year. Above all, if continued progress in [el ritmo de distribución de] vaccines help speed up the return to normal activities, ”he said.
Some economists have warned of the risk of the economy overheating as the vaccination process becomes more widespread and reaches a majority of Americans – a horizon, according to President Joe Biden, that could be completed in July – but Fed officials they have underestimated that concern. The dynamics that reflect inflation generally “do not change by a penny,” said Powell on Tuesday, reiterating that, if that happens and there is a rebound in prices, the Fed has the right tools to cool the rise.
The Fed’s stimulus policy is in addition to the two large aid packages approved last year by Congress, and to the ambitious $ 1.9 trillion program, pending approval in the Chambers, with which the Administration de Biden aims to respond to the needs of families and SMEs.