Powell: "No Reduction in Asset Purchases Until Substantial Progress Confirmed"

Emphasizing Continuous Employment and Inflation Targets Amid March Employment Recovery
Indicating Global Vaccine Distribution Necessity
"Economic Situation Still Uncertain"

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Baek Jong-min] Jerome Powell, Chairman of the Federal Reserve (Fed), reiterated that substantial progress in employment and inflation targets must be confirmed before tapering asset purchases. Powell also stated that it is too early to be reassured until COVID-19 vaccinations are completed worldwide for economic recovery.

Powell made these remarks on the 8th (local time) while participating in the discussion at the International Monetary Fund (IMF) and World Bank annual spring meetings.

Powell diagnosed that although the reopening of the U.S. economy will occur fairly soon due to COVID-19 vaccinations and other factors, the economic recovery is uneven and incomplete. He emphasized that employment must show a more sustained increase.

While welcoming the Labor Department’s report showing strong employment in March, Powell stressed that improvements are still needed. He said, "I want to continue to see reports like the March employment figures that show progress toward our goals."

The U.S. nonfarm payroll employment for March, announced by the Labor Department, reached 910,000, raising expectations for economic recovery. The unemployment rate also fell from 6.2% in the previous month to 6.0%.

He also expressed great concern about the economic disparity between advanced and poor countries due to gaps in vaccine distribution. He judged, "The global vaccination situation is a risk factor for what we are doing." This reflects worries that the more countries delay vaccine distribution, the slower the global economic recovery will be.

Regarding the tapering of the $120 billion monthly asset purchase program, Powell emphasized that "actual progress" must be shown in employment and inflation targets. He pointed out that many people still need to return to work and that significant efforts are required for employment recovery.

Powell also dismissed concerns about inflation. While he did not expect sustained inflation increases, he indicated that if inflation occurs, interest rate hikes would be used as a tool to respond.

He repeatedly emphasized that inflation will exist but will not be persistent, reminding that the Fed is closely monitoring the situation.

Powell’s remarks align with the opinions of Fed officials shown in the minutes of the March Federal Open Market Committee (FOMC) meeting released a day earlier.

The minutes introduced that participants stated asset purchases could only be tapered when there is actual progress, not just expectations, in inflation and employment recovery.