Treasury Secretary Janet Yellen will reportedly back Jerome Powell for another term as Fed Chair

U.S. Federal Reserve Chair Janet Yellen (L) congratulates Fed Governor Jerome Powell at his swearing-in ceremony for a new term on the Fed's board, in Washington in this handout photo taken and released June 16, 2014. REUTERS/U.S. Federal Reserve/Handout via Reuters
U.S. Federal Reserve Chair Yellen congratulates Fed Governor Powell at swearing-in ceremony in Washington

  • Janet Yellen will support another term for Jerome Powell as Fed chair, Bloomberg reported Saturday.
  • Powell succeeded Yellen as the head of the US central bank.
  • Biden is expected make a decision in the coming days.
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Treasury Secretary and former Chair of the Federal Reserve Janet Yellen will support another term for her successor Jerome Powell as head of the US central bank, according to a report from Bloomberg on Saturday.

Yellen made such comments to senior White House advisors, Bloomberg reported, citing people familiar with the matter.

Powell’s four-year term as Fed chair will end in early 2022. President Joe Biden, who has the responsibility of appointing the chair of the Fed, will reportedly make a decision on the matter in coming days.

Yellen, who was appointed chair of the Fed under President Barack Obama and then-Vice President Joe Biden, was appointed by Biden to the Treasury Secretary position. She thus presumably holds some degree of influence over the decision Biden will make.

The chair of the Fed is arguably the top economic policymaking position in the world as that person oversees the world’s largest and most influential economy. The chair, alongside other members of the central bank’s Federal Open Market Committee, plays a major role in setting interest rates and conducting asset purchases that provide liquidity to markets.

Powell, who was appointed by President Donald Trump in early 2018, has overseen the central bank and its policy during the economic mayhem caused by the coronavirus pandemic. As the world shut down and economic activity came to halt, sending unemployment rates to frightening levels, Powell and the FOMC cut interest rates to near-zero and started a mammoth quantitative easing program in which the country essentially buys its own debt. This has helped the economy and financial markets bounce back.

Now, the central bank is in the midst of deciding when, to what degree, and at what pace they will tighten monetary policy.

Some within the Fed, as well as some outside observers, believe the bank should start tapering asset purchases soon. Others take a more dovish stance, not wanting to risk an self-inflicted economic downturn. The next chair of the Fed, Powell or not, will have the difficult task of navigating the delicate economic environment.

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Americans can look forward to a ‘very strong’ labor market in 2022, Fed’s Powell says

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Markets want more clarity from Jerome Powell and the Fed

  • The labor market is on track for a healthy rebound in the coming months, Fed Chair Jerome Powell said.
  • One can expect “strong job creation” in the summer and heading into fall, he added.
  • The labor shortage is temporary, and there’s reason to believe worker supply can exceed expectations, Powell said.
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The labor market is far from a complete recovery, but the country should see encouraging progress over the next several months, Federal Reserve Chair Jerome Powell said Wednesday.

Data tracking Americans’ return to work has been somewhat mixed throughout spring. On one hand, the economy is creating jobs at a steady pace. April and May both saw hundreds of thousands of payroll additions, although April was dismal in light of expectations of much bigger gains. Jobless claims are far lower than they were just months ago. And stronger wage growth suggests businesses are paying up to counter the labor shortage.

On the other, recent reports have fallen short of economists’ forecasts. Jobless claims unexpectedly ticked higher last week. And even at May’s more accelerated rate of payroll growth, it would take until July 2022 to fully recover all the jobs lost during the pandemic.

Despite the downside risks, Powell holds an unquestionably positive outlook for the labor market’s rebound. In a Wednesday press conference, the Fed chair said payroll growth should accelerate in the coming months as the pandemic fades further and more Americans rejoin the workforce.

“I think it’s clear, and I am confident, that we are on a path to a very strong labor market,” Powell said. “I would expect that we would see strong job creation building up over the summer and going into the fall.”

Projections from the Federal Open Market Committee support Powell’s sentiment. Policymakers expect the unemployment rate to slide to 4.5% by the end of 2021 from the May reading of 5.8%. The median forecast for 2022 unemployment was revised slightly lower to 3.8% from the March estimate of 3.9%. Officials then expect the rate to match its pre-pandemic low of 3.5% by the end of 2023.

Powell also downplayed concerns that a shortage of workers would permanently drag on the recovery. The previous economic expansion showed that labor supply can exceed expectations as the unemployment rate sits at historic lows, the Fed chair said. There’s no reason to think that dynamic won’t repeat itself, he added.

In the near term, Powell sees a handful of trends keeping Americans from returning to work. Childcare costs, COVID-19 fears, and enhanced unemployment benefits are likely dragging on labor-force participation, the central banker said, echoing comments from other Fed officials and lawmakers.

Another major hurdle could come from a simple skills mismatch, he added. Americans who could return to their previous jobs have largely done so already, Powell said. With those easy gains out of the way, a significant portion of payroll growth will have to come from Americans finding new work.

“This is a question of people finding a new job, and that’s just a process that takes longer. There may be something of a speed limit on it,” Powell said. “There’s just a lot that goes into the function of finding a job.”

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Fed’s Powell says it’s not yet time to consider shrinking emergency asset purchases

jerome powell
Federal Reserve Chairman Jerome Powell.

  • It’s “not yet” time for the Fed to even consider pulling back its policy support, Chair Powell said.
  • Fed policymakers ruled to hold interest rates at historic lows and maintain its asset purchases.
  • The recovery is “highly uncertain” and the economy is far from hitting the Fed’s goals, Powell said.
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The Federal Reserve expects a strong economic recovery through 2021, but it still aims to maintain ultra-easy financing conditions well into the future.

Members of the Federal Open Market Committee ruled on Wednesday to hold interest rates at historic lows following the conclusion of its two-day meeting. The central bank will also maintain its pace of purchasing at least $80 billion in Treasurys and $40 billion in mortgage-backed securities each month, according to a press release.

Buying such assets accommodates smooth market functioning and thereby supports “the flow of credit to households and businesses,” the Fed said in a statement.

Yet investors and economists alike have looked to Fed officials in recent weeks for any hints at when the central bank will taper its purchases. An unexpected withdrawal from the Fed could spark a sell-off in Treasurys, rapidly lift yields, and prematurely raise borrowing costs while the economy is still rebounding.

Policymakers’ newly improved projections for growth and employment place new pressure on the central bank to tighten monetary policy. Still, it’s “not yet” time to even consider tapering due to lasting risks to the economic outlook, Powell said during a press conference.

Concerns of a rate hike coming earlier than the Fed’s signaling also overlook the lasting risks to the US recovery, the central bank chief added.

“The state of the economy in two to three years is highly uncertain and I wouldn’t want to focus too much on the timing of potential rate increase that far into the future,” Powell said.

Staying on target for inflation and maximum employment

The statement underpins previous commentary from the Fed emphasizing it will patiently wait to reach its goals of above-2% inflation and maximum employment. Economic reopening and stimulus might drive a sudden rise in inflation, but the increase isn’t likely to be permanent, Powell said.

Inflation would then need to steadily trend above 2% before the Fed fully retracts its policy support, he added.

Reaching maximum employment is set to be a similarly lengthy process. While Fed officials now see the unemployment rate falling to 4.5% in 2021, the central bank is also tracking wage growth and labor force participation to determine the labor market’s health.

“No matter how well the economy performs, unemployment will take quite a time to go down and so will participation,” Powell said. “The faster the better. we’d love to see it come sooner rather than later.”

Maintaining loose monetary policy for such a long period marks a paradigm shift for the central bank. Decades-old tenets of economic theory held that unemployment could only drop so much before lifting inflation.

That dynamic is antiquated, at least according to the Fed chair. The previous expansion showed that, even with unemployment below 4% and inflation trending below 2%, hiring and wage growth could improve in historically underserved communities. Failing to give those groups a shot at a robust recovery would set the country back as it emerges from the pandemic, Powell said.

“There was a time when there was a tight connection between unemployment and inflation. That time is long gone,” he said. “We had low unemployment in 2018 and 2019 and the beginning of ’20 without having troubling inflation at all.”

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Monetary stimulus will remain in place well into economic recovery, Fed Chair Powell says

jerome powell fed mask
  • Federal Reserve Chairman Jerome Powell reiterated Thursday that the central bank is far from tapering its asset purchases or raising interest rates.
  • “Now is not the time to be talking about an exit” from easy monetary policy, the central bank chief said in a virtual discussion.
  • The comments come after various Fed officials suggested that inflation could pick up faster than expected and, in turn, prompt an early rate hike.
  • Powell rebuffed fears of an unexpected policy shift, noting the central bank will notify the public “well in advance” if it is considering changes to its policy stance.
  • Visit Business Insider’s homepage for more stories.

Those worrying the Federal Reserve will prematurely rein in monetary stimulus have little to fear, Fed Chairman Jerome Powell said Thursday.

As COVID-19 vaccines roll out across the country, investors and economists have looked to Fed officials for any hints as to when its extremely accommodative policy stance could reach its conclusion. The central bank is currently buying $120 billion worth of Treasurys and mortgage-backed securities each month to ease market functioning, and its benchmark interest rate remains near zero to encourage borrowing.

An unexpected reversal from such easy monetary conditions risks spooking financial markets and cutting into the country’s bounce-back. Powell emphasized on Thursday that the central bank remains far from adjusting monetary conditions and that markets need not worry about a surprise policy shift.

“Now is not the time to be talking about an exit,” the central bank chief said in a virtual discussion hosted by Princeton University. “I think that is another lesson of the global financial crisis, is be careful not to exit too early. And by the way, try not to talk about exit all the time if you’re not sending that signal.”

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The messaging mirrors past statements from Fed policymakers. Early in the pandemic, Powell told reporters the central bank wasn’t “thinking about thinking about” lifting interest rates. The Federal Open Market Committee noted last month that changes to its policy stance won’t arrive until “substantial forward progress” toward its inflation and employment objectives is made.

Still, recent commentary from some officials has stoked some fears that the Fed could cut down on the pace of its asset purchases sooner than expected. Kansas City Fed President Esther George said Tuesday that inflation could reach the Fed’s target “more quickly than some might expect” if the economy’s hardest hit sectors quickly recover.

A swifter-than-expected rebound could prompt an interest-rate hike as early as mid-2022 Atlanta Fed President Raphael Bostic said Monday. The projection stands in contrast with the FOMC’s general expectation for rates to remain near zero through 2023.

Powell reassured that, when the Fed starts considering a more hawkish stance, messaging will come well before action is taken. Treasury yields responded in kind, with the 10-year yield climbing nearly 4 basis points to 1.127 and the 30-year yield rising about 6 basis points to 1.874.

“We’ll communicate very clearly to the public and we’ll do so, by the way, well in advance of active consideration of beginning a gradual taper of asset purchases,” the Fed chair said.

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