Powell says economy still needs Fed support, markets not driven by loose money

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WASHINGTON — Federal Reserve Chair Jerome Powell on Tuesday pushed back on suggestions that U.S. central bank support for the economy risked inflating a dangerous asset bubble, insisting the support was still needed and that investors were responding mostly to expectations for a successful recovery.

From the anticipated success of coronavirus vaccines to the large stash of savings available for households to spend in coming months, “there are many factors that are contributing to what is happening in markets right now,” Powell said in a hearing before the Senate Banking Committee. “Monetary policy I would certainly agree is one of them,” but still needs to be deployed to support the economy until it is more fully healed.

Interest rates will remain low and the Fed’s bond purchases will continue “at least at the current pace until we make substantial further progress towards our goals … which we have not really been making,” Powell said in the hearing, his first since Democrats won the White House and control of both chambers of Congress.

The Fed chief was responding to questions from Republican senators concerned that the combination of Fed asset purchases, a potential vaccine-driven economic boom, and passage of another massive stimulus package may drive asset prices to unsustainable levels and spark inflation…

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From Financial Post - 24/02/2021