Powell: US Economy Able to Address Current, Future Covid-19 Waves

Fed Chair Jerome Powell, speaking at the Senate hearing for his re-nomination, reiterated on Tuesday that he expects the economy to be able to deal with the current and future Covid-19 outbreaks.

He also noted that inflationary pressures are set to remain elevated well into 2022. Jerome Powell, added that the Fed at the moment needs to focus more on the inflation side of its mandate versus the employment side given that inflation is further from the Fed’s target than employment.

Key Quotes:
“There may be lower hiring and pause in growth due to Omicron but should be short-lived.”

“The next quarters could be very positive for the economy after Omicron has subsided.”

“We are seeing an economy that functions during Covid waves.”

“Risks on both sides on growth and potentially on inflation.”

“If it does, our policy will continue to adapt.”

“If inflation lasts longer, that would require a policy response.”

“If inflation will last longer that would imply more risk of becoming entrenched, our policy will respond.”

“This year I expect fed will raise interest rates, end asset purchases and perhaps later this year beginning to allow the balance sheet to shrink.”

“We have to be humble and nimble.”

“The Fed has not made any decisions on timing for any of normalization process.”

“Will have to be open to changing environment, monetary policy will have to adapt.”

“Monetary policy will have to adapt as we learn more about inflation.”


“This year we will in all likelihood normalize policy, including raising rates this year and may start balance sheet runoff later this year.”

“Supply-side constraints have been very persistent, not seeing much progress on that.”

“We have to achieve price stability, confident we will.”

“We have to achieve price stability; am confident we will.”

“At some point perhaps later this year will allow balance sheet to shrink.”

Powell added that the Fed is trying to get to a place where interest rates are more neutral for the economy and then to a place where they are “tight”.

As for market reaction, perhaps motivated by a lack of fresh surprises from Powell speech over the last hour, the US dollar has been weakening in recent trade, while risk assets such as the Nasdaq 100 that had recently been hit by fears over Fed’s hawkishness are gaining. The Nasdaq 100 index is now up 0.8% on the session, erasing early session losses.