Path of United States economy depends on course of coronavirus, says Jerome Powell

Path of United States economy depends on course of coronavirus, says Jerome Powell

Fed Chairman Jerome Powell said on January 14 that it was too early for the central bank to discuss changing its monthly bond purchases.

The US bond market will either wait on the US Federal Reserve for assurances that it will maintain its bond purchases for the foreseeable future - or risk a disorderly rise in yields.

Powell noted that the fate of the economy was tied to the success of the United States vaccination programme.

"Something like 9 million people remain unemployed as a effect of the pandemic", he continued, noting a total equal to the peak of the job losses during the Great Recession in 2009.

"We're focused on finishing the job we're doing, which is supporting the economy, and giving the economy the support it needs", Powell said. Traders were also focused on the eye-popping surge in shares of GameStop, a money-losing video game seller that became the focus of a battle between small investors bidding it higher and big hedge funds betting it would fall.

"There's nothing more important to the economy now than people getting vaccinated", he said, adding that the weakest parts of the economy are sectors where people need to work near one another.

Powell was pressed during the news conference on whether the Fed should respond to the recent speculative surge in the prices of some individual stocks, notably shares of GameStop, and whether that buying frenzy suggested a unsafe bubble in overall stock prices.

"It's very much appropriate that monetary policy be highly accommodative to support maximum employment and price stability", he said. Powell deflected the questions by saying the Fed's interest rate policies aren't well-suited to address speculation in the stock market.

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But the economy also lost jobs in December, a large chunk of the workforce will likely remain sidelined until the health crisis eases, and Powell said the Fed's rescue effort will not end until those Americans are working again.

Powell said on Wednesday that efforts by a central bank to "lean against" potential asset bubbles could do more harm than good.

"The path of the economy continues to depend significantly on the course of the virus".

The Fed has signaled that it expects to keep its key short-term rate at a record low between zero and 0.25 percent through at least 2023.

Gold prices moved lower but finished off session lows.

Powell had hinted that the Fed would not raise rates until the economy shows signs of recovery from the pandemic impact, especially in inflation and the employment rate.

"Frankly, we welcome somewhat higher inflation", Powell said. In November, U.S. home prices jumped at their fastest pace in more than six years, surging 9 percent compared with 12 months earlier, according to the S&P CoreLogic Case-Shiller 20-city home price index.

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