Powell: "Turning Point for Strong Growth in the US Economy (Comprehensive)"

"Inflation Must Sustain 2% for Interest Rate Hike"
"No Sharp Inflation Increase"
"Asset Market Bubble Unmeasurable... Financial System Stability Must Be Ensured"

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Baek Jong-min] Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), stated that the U.S. economy is at a turning point for stronger growth and expanded employment. In this regard, experts forecast that the U.S. economy will record its highest growth rate in 38 years this year. Chairman Powell repeatedly emphasized that interest rate hikes will only be possible after inflation rises above 2% for a considerable period, drawing a clear line that there will be no rapid inflation surge.

◆ "U.S. Economy Growing Much Faster" = On the 11th (local time), in an interview with CBS’s "60 Minutes," Chairman Powell said, "We feel like we are in a place where the economy is starting to grow much faster and job creation is coming much faster."

Chairman Powell emphasized, "What we are seeing now looks like an economy actually standing at a turning point," adding, "This is thanks to widespread vaccinations, strong fiscal support, and robust monetary policy support." He introduced market forecasts expecting this year’s economic growth rate to be 6-7%, the highest in 30 years, and predicted it could be slightly higher. He specifically anticipated "strong growth in the second quarter."

On the same day, The Wall Street Journal reported that according to an analyst survey, the U.S. economic growth rate this year is expected to reach 6.4%, the highest since 1983 (7.9%). Although the February Consumer Price Index (CPI) rose by 1.7%, the June CPI is expected to reach 3%. This is the highest CPI increase expected since 2012. The U.S. Department of Labor plans to release the March CPI on the 13th.

Chairman Powell remains cautious about the possibility of a COVID-19 resurgence. He also emphasized that the current economic recovery is faster than expected a year ago but is not typical. In response to a question about seeing people who lost jobs living in tents, he pointed out, "Some parts of the economy are recovering quickly and even growing, but sectors involving direct public contact such as travel, entertainment, and restaurants are not keeping pace." Powell noted that 8.5 to 9 million people are still unemployed and pledged to continue maximum support to help them return to work.

◆ "No Interest Rate Hikes This Year" = Chairman Powell drew a line stating there will be no interest rate hikes this year, saying, "We need to see inflation rise moderately above 2%. On average, it must reach 2% before we can raise rates." Despite concerns that rapid economic growth could cause significant inflation, he asserted that due to changes in economic conditions, it is unlikely to see rapid inflation like in the early 1980s.

When asked whether the Fed’s easing policies have caused a stock market bubble, Powell said some asset prices have risen according to some historical indicators, but emphasized, "Since we do not have the ability to perfectly identify bubbles in asset markets, it is important to have a strong financial system resilient to shocks."

Regarding the massive stock sell-off incident triggered by Archegos Capital, he said regulators worldwide are cooperating to monitor the situation carefully, adding, "It is surprising that a single fund can cause significant losses to large banks."

He firmly stated that there will be no global financial system collapse like in 2008 but expressed concern about cyber risks that could disrupt payment systems of large banks.

This content was produced with the assistance of AI translation services.