Powel on 'Bidulgi': "Employment and Inflation Below Target... Maintaining Interest Rates and Asset Purchases" (Update)

Dismissal of Inflation Concerns in Congressional Testimony
Maintaining a Dovish Stance
"Monetary Policy Is Only Part of the Reason for Asset Price Increases"
Bond Yields Reverse to Decline, Nasdaq Drop Narrows

[Asia Economy New York=Correspondent Baek Jong-min] Jerome Powell, Chairman of the Federal Reserve (Fed), emphasized maintaining zero interest rates and asset purchases despite concerns about inflation.

In his opening statement to Congress on the 23rd (local time), Chairman Powell said, "Inflation and employment still fall short of the Fed's goals," and stated that the current employment situation requires support.

He also said, "We will continue zero interest rates and large-scale asset purchases until substantial progress is made," warning that achieving the goals will take time.

Chairman Powell assessed that COVID-19 significantly impacted inflation and that inflationary pressures are not threatening. He analyzed that inflation will not be a negative factor for the economy.

He further explained, "The Fed is fully committed to using all tools to support the economy."

Last year, the Fed introduced an average inflation targeting system, stating that it would not immediately raise the benchmark interest rate even if inflation exceeds 2%.

While warning that the economic outlook is very uncertain, Powell said there is a prospect for improvement by the end of this year due to vaccinations.

In his opening remarks, Powell did not mention the sharp rise in U.S. Treasury yields caused by inflation concerns. However, during the Q&A session, he acknowledged that the Fed's monetary policy has influenced the rise in some asset prices.

Regarding questions about the impact of monetary policy on the rise in prices of GameStop, bonds, real estate, and commodities, Powell said, "There is a connection," and explained, "Monetary policy is one of several reasons for the rise in asset prices."

Powell's remarks immediately affected the market. The Nasdaq index, which had fallen as much as 3.2% early in the session due to inflation concerns, narrowed its losses to 1.2% as of 10:50 a.m.

The 10-year U.S. Treasury yield also reversed to a downward trend after Powell's remarks, recording 1.355%. A decline in bond yields means a rise in bond prices.

CNBC cited experts saying that Powell's remarks were very "dovish."