Powell: the unemployment rate in the United States is close to 10% and inflation expectation is difficult to sustain

Fed chairman Colin Powell said on Wednesday that the Fed will continue to support the U.S. economy through low interest rates and massive asset purchases. He stressed that the novel coronavirus pneumonia is still the main force in the labour market. In his speech at the New York Economic Club on the same day, Powell reiterated his view that “patient and loose monetary policy stance” will be an important factor to restore the healthy state of the economy. In this state, workers, especially low-income groups, can find jobs. The chairman of the Federal Reserve also called on the government to increase financial support for the economy. Monetary policy alone is not enough to restore the full vitality of the labor market. “This will require the commitment of the whole society, including contributions from the government and the private sector. After the epidemic, many individuals and families need support in the new economic environment, and so do small businesses. Assistance will help them contribute and share the benefits of economic prosperity. ” He said. The U.S. unemployment rate fell to 6.3% in January from 6.7% in December, the labor department said on Friday. In February 2020, before novel coronavirus pneumonia, the unemployment rate in the United States was at a low of nearly 50 years, 3.5%. According to the Fed’s updated economic outlook, most Fed officials do not expect the unemployment rate to approach the level at the beginning of last year until 2023. < / P > < p > in order to alleviate the impact of the epidemic, the Federal Reserve took a series of unconventional measures last year to stabilize the market and support the economy, lowered the short-term interest rate to near zero, launched a series of emergency loan programs, and purchased US Treasury bonds and mortgage bonds on a large scale. The U.S. government has launched two rounds of relief bills, and now the Biden administration and members of Congress are pushing forward a new round of $1.9 trillion stimulus plan, which has also aroused Republican doubts about the high federal debt. < / P > < p > Powell has previously said that the debt level of the United States is “far from unsustainable”, and it is better to provide too much support for the economy than too little. In his speech on Wednesday, Powell pointed out that since the outbreak, the Federal Reserve has been worried about the long-term impact of the virus on the labor market, which will also weaken the economic recovery capacity. “From the previous expansion cycle, it can be seen that it may take many years to reverse this damage.” He said. According to Powell, the current unemployment rate underestimates the real impact of the epidemic. If the statistics have left the labor market and those whose employment status is wrongly classified, the “real” unemployment rate may rise to nearly 10% in January. Data released by the New York Federal Reserve this week show that low-income groups have been most affected by the epidemic, especially in jobs that are closely related to others, such as bars, restaurants, shops, places of entertainment and hotels. < / P > < p > former U.S. Treasury Secretary summers and many economists are worried that too much financial support for the economy will lead to an outbreak of inflation. They hope that the Biden administration will reduce the scale of the relief program. Powell is not worried about this and believes that inflation will not rise “substantially or continuously” at present. With the reopening of the economy, price increases caused by spending growth are unlikely to continue. Over the past three decades, inflation has been much lower and more stable. < / P > < p > the chairman of the Federal Reserve said that a strong labor market is a worthy goal. There is still a long way to go for such a goal. “There is every reason to expect that if it had not been for this epidemic, the labor market would have strengthened further without causing a worrying rise in inflation. My colleagues and I are firmly committed to doing what we can to promote full employment. ” He said. < / P > < p > Powell defended the Fed’s monetary policy stance, reiterating that even if inflation temporarily exceeds 2%, the Fed will not consider raising interest rates. He said the Fed needed to see “substantial progress” on its employment and inflation targets before cutting its $120bn monthly asset purchases.