- Oops!Something went wrong.Please try again later.
"The economy no longer needs or wants the very accommodative policies we have had in place to deal with the pandemic and the aftermath."
In testimony before the U.S. Senate Banking Committee, Federal Reserve Chair Jerome Powell said on Tuesday that the massive stimulus the central bank has been providing was no longer needed...
"The economy is in a completely different place."
...as the Fed shifts its focus to fighting inflation and plans to raise interest rates and decrease its balance sheet in 2022.
"We're really just going to be moving over the course of this year to a policy that is closer to normal. But it's a long road to normal from where we are. Right now, we are very highly accommodative and it is really time for us to begin to move away from those emergency pandemic settings to a more normal level. It shouldn't, it really should not have negative effects on the employment market."
Powell also said he expected the country to power through the latest surge in coronavirus cases, and that any impact on the economy likely will not derail the Fed's plans to tighten monetary policy.
"I expect the economy to continue to be able to deal with these, with these outbreaks. I think it is likely, though, if the experts are right and Omicron is going to go through really quickly and peak perhaps within a month and then come down after that, I think it's likely you will see, you know, lower hiring and perhaps a pause in growth and that kind of thing. But it should be short-lived."
Powell told the lawmakers, who appeared to be leaning towards endorsing him for a second four-year term, that rather than guarding against a pandemic-related downturn or promoting more job growth, it was now inflation that needed to be the focus.
"...sometimes that's maximum employment, sometimes it's inflation. I'd say now it's inflation."
Inflation was top of mind for the senators during the hearing, and Powell told them he now thinks inflation will ease by the middle of 2022, but that the Fed stood ready to do what was needed.
U.S. stocks, which have started the year on a weak note, edged up during Powell's testimony, with energy and tech stocks posting the biggest gains.