Attendance at the House Emphasizes Coordination on Timing of Interest Rate Hikes
House Financial Committee Chair "Grateful for Powell's Leadership and Creativity"
US Media Reports Possibility of Reappointment
[Asia Economy New York=Special Correspondent Baek Jong-min] Jerome Powell, Chairman of the U.S. Federal Reserve (Fed) (photo), reaffirmed his stance that the rise in inflation is temporary and that he will not rush to raise interest rates. Analysts also suggested that this signals a positive outlook for Powell's reappointment.
On the 22nd (local time), Powell appeared at a House hearing and stated, "We will not preemptively raise interest rates until we see substantial evidence of inflation or other imbalances."
He said, "Most of the inflation increase occurred in areas directly affected by the resumption of economic activities, such as used cars and trucks," adding, "Those prices will stop rising and eventually begin to fall." However, Powell also noted that "the rise in inflation could be larger and more persistent than we expected."
Powell's remarks are interpreted as an attempt to quell concerns over the Fed's dot plot released last week, which forecasted an interest rate hike in 2023, a year earlier than previously expected. Powell had previously emphasized that the dot plot does not represent the Fed's official stance.
John Williams, President of the New York Federal Reserve Bank, also dismissed the idea by saying, "An increase in the benchmark interest rate is a matter far in the future." Although James Bullard, President of the St. Louis Fed, joined the 'hawkish' camp advocating for a rate hike in 2022, Powell and Williams have not aligned themselves with the 'dovish' side.
Meanwhile, at the hearing, House Financial Services Committee Chair Maxine Waters drew attention by saying, "Chairman Powell is ready to think big. We appreciate your leadership and creativity." U.S. media interpreted Waters' remarks as linked to Powell's reappointment.
Bloomberg reported that her comments might reflect the views of the progressive wing of the Democratic Party, which has opposed Powell's reappointment, who was appointed during the previous administration. Powell's term ends in February next year. The market fears that if Powell fails to be reappointed, significant turmoil in the financial markets will be inevitable.
President Joe Biden, who holds the authority to appoint the Fed chairman, met Powell face-to-face at the White House for the first time a day earlier.
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