Federal Reserve Chair Jerome Powell speaks during a Senate Banking Committee hearing on Capitol Hill, in Washington, DC, 01 December 2020. EPA Photo
Federal Reserve Chair Jerome Powell speaks during a Senate Banking Committee hearing on Capitol Hill, in Washington, DC, 01 December 2020. EPA Photo
Federal Reserve Chair Jerome Powell speaks during a Senate Banking Committee hearing on Capitol Hill, in Washington, DC, 01 December 2020. EPA Photo
Federal Reserve Chair Jerome Powell speaks during a Senate Banking Committee hearing on Capitol Hill, in Washington, DC, 01 December 2020. EPA Photo

Federal Reserve's Powell upbeat on US economy: 'Light at the end of the tunnel'


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US Federal Reserve chairman Jerome Powell sounded the most optimistic he’s been since the coronavirus crisis began in March, while pledging that the central bank will keep providing the economy with plenty of support well into the future.

Speaking to reporters on Wednesday after the Fed’s last policymaking meeting of a tumultuous year, Mr Powell said he expects the economy to perform “strongly” in the second half of 2021 as more and more Americans are vaccinated against the virus – though he cautioned that the next few months would be “challenging” until that occurs.

New Covid-19 cases, both here in the US and abroad, is particularly concerning

“We can kind of see the light at the end of the tunnel,” Mr Powell said. “We’re thinking that this could be another long expansion.”

The more optimistic tone caps a year in which the Fed went to extraordinary lengths to combat the deepest decline in the economy since the Great Depression, cutting interest rates effectively to zero and unlocking what Mr Powell has estimated is almost $2 trillion of funding for businesses, and state and local governments through emergency lending facilities.

It’s also bought trillions of dollars of Treasury and mortgage-backed debt, depressing interest-rate costs for the federal government, home buyers and other borrowers.

Policymakers on Wednesday voted to maintain monthly bond purchases of at least $120 billion until they see “substantial further progress” in reducing unemployment and increasing inflation. Some market analysts took that to mean continued support, at that pace, into 2022.

  • Parents and children gather in front of New York's City Hall to protest the closing of public schools. AP
    Parents and children gather in front of New York's City Hall to protest the closing of public schools. AP
  • Unused school buses fill a bus company parking lot in the Bronx, New York. EPA
    Unused school buses fill a bus company parking lot in the Bronx, New York. EPA
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    A classroom is empty with the lights off on what would otherwise be a normal school day at Yung Wing School in New York City. AFP
  • New York Public School 41 sits closed in the Queens borough of New York. Reuters
    New York Public School 41 sits closed in the Queens borough of New York. Reuters
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    Commuters wearing protective masks walk through the Times Square station in New York. Bloomberg
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    A conductor wears a protective mask while operating a subway train in New York. Bloomberg
  • A trader wearing a protective face mask walks outside the New York Stock Exchange in the financial district of New York. Reuters
    A trader wearing a protective face mask walks outside the New York Stock Exchange in the financial district of New York. Reuters
  • People look at the newly revealed Macy's Herald Square holiday windows in New York City. This year's windows look to give thanks to the city and those who worked on the frontlines of the Coronavirus pandemic. AFP
    People look at the newly revealed Macy's Herald Square holiday windows in New York City. This year's windows look to give thanks to the city and those who worked on the frontlines of the Coronavirus pandemic. AFP
  • People stand in line at a food distribution event ahead of the Thanksgiving holiday in the Brooklyn borough of New York City. AFP
    People stand in line at a food distribution event ahead of the Thanksgiving holiday in the Brooklyn borough of New York City. AFP
  • Nurses and their supporters rally in front of Montefiore Medical Center in the Bronx borough of New York. The nurses were demonstrating to bring attention to the the lack of preparedness for a coronavirus second wave. AP
    Nurses and their supporters rally in front of Montefiore Medical Center in the Bronx borough of New York. The nurses were demonstrating to bring attention to the the lack of preparedness for a coronavirus second wave. AP

Mr Powell called the new language on asset purchases “powerful,” but declined to specifically define what inflation level and unemployment rates would trigger a future change in the buying campaign.

He did though make clear that the Fed would be in no hurry to pull back on the massive stimulus it is providing to the economy as growth picks up.

“Powell was pretty upbeat about the outlook especially for the second half of next year with a rather-bullish assumption of herd immunity by midyear with the vaccines,” said Thomas Costerg, senior US economist at Pictet Wealth Management in Geneva. “But the monetary-policy communication remains still very dovish – and even more dovish when juxtaposed to this rather upbeat macro outlook.”

Upgraded Forecasts

Federal Open Market Committee policymakers upgraded their forecasts for economic growth in 2021 and 2022, to a median projection of 4.2 per cent and 3.2 per cent, respectively. But officials signalled they continue to expect to hold the federal funds rate near zero at least through 2023.

“We’re going to keep policy highly accommodative until the expansion is well down the tracks,” Mr Powell said.

The Fed chair welcomed steps in Congress to put together another relief package for households and businesses hard hit by the fallout from the coronavirus crisis, saying that was the best way to build a bridge for the economy to the better times he sees ahead.

“The ongoing surge in new Covid-19 cases, both here in the US and abroad, is particularly concerning,” he said. “It looks like a time when what is really needed is fiscal policy and that’s why it is a very positive thing that we’re getting that.”

Fiscal Aid

Congressional leaders are discussing a package worth almost $900bn that would include a new round of stimulus payments to individuals and enhanced federal unemployment benefits.

Mr Powell played down concerns that the Fed’s ultra-easy monetary stance would spark an unwanted burst of inflation, saying that there were powerful global forces holding it down. If inflation does rise as more Americans are vaccinated and the economy opens up, that’s likely to prove temporary, he said.

He also evinced limited concern that super low interest rates would lead to bubbles in the stock and financial markets, though he did allow that “asset prices are a little high.”

Fuelled in part by the Fed’s very stimulative policy, stock prices have surged to record levels after cratering in March when the crisis began. And Neil Dutta, head of US economic research at Renaissance Macro Research, sees more to come.

Houses under construction in a subdivision in Antioch, Illinois, US, 16 December 2020. EPA
Houses under construction in a subdivision in Antioch, Illinois, US, 16 December 2020. EPA

“The Fed marked up growth in each of the next two years, marked down unemployment, and marked up core inflation. Despite this, they don’t expect to move rates. Good for risk appetite. Buy stocks,” he said.

Instead of dwelling on the potential risks of the Fed’s stance, Mr Powell repeatedly hammered home the message that policy would remain very easy to aid in the recovery he sees coming.

“Although there is light at the end of the tunnel, asset purchases are continuing for some time and the funds rate is likely to stay at zero for years,” said Jonathan Wright, an economics professor at Johns Hopkins University and a former Fed economist.

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Get Out

Director: Jordan Peele

Stars: Daniel Kaluuya, Allison Williams, Catherine Keener, Bradley Whitford

Four stars

The Bio

Name: Lynn Davison

Profession: History teacher at Al Yasmina Academy, Abu Dhabi

Children: She has one son, Casey, 28

Hometown: Pontefract, West Yorkshire in the UK

Favourite book: The Alchemist by Paulo Coelho

Favourite Author: CJ Sansom

Favourite holiday destination: Bali

Favourite food: A Sunday roast

SPECS

Mini John Cooper Works Clubman and Mini John Cooper Works Countryman

Engine: two-litre 4-cylinder turbo

Transmission: nine-speed automatic

Power: 306hp

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Film: In Syria
Dir: Philippe Van Leeuw
Starring: Hiam Abbass, Diamand Bo Abboud, Mohsen Abbas and Juliette Navis
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India team for Sri Lanka series

Test squad: Rohit Sharma (captain), Priyank Panchal, Mayank Agarwal, Virat Kohli, Shreyas Iyer, Hanuma Vihari, Shubhman Gill, Rishabh Pant (wk), KS Bharath (wk), Ravindra Jadeja, Jayant Yadav, Ravichandran Ashwin, Kuldeep Yadav, Sourabh Kumar, Mohammed Siraj, Umesh Yadav, Mohammed Shami, Jasprit Bumrah.

T20 squad: Rohit Sharma (captain), Ruturaj Gaikwad, Shreyas Iyer, Surya Kumar Yadav, Sanju Samson, Ishan Kishan (wk), Venkatesh Iyer, Deepak Chahar, Deepak Hooda, Ravindra Jadeja, Yuzvendra Chahal, Ravi Bishnoi, Kuldeep Yadav, Mohammed Siraj, Bhuvneshwar Kumar, Harshal Patel, Jasprit Bumrah, Avesh Khan

Armies of Sand

By Kenneth Pollack (Oxford University Press)
 

Name: Peter Dicce

Title: Assistant dean of students and director of athletics

Favourite sport: soccer

Favourite team: Bayern Munich

Favourite player: Franz Beckenbauer

Favourite activity in Abu Dhabi: scuba diving in the Northern Emirates 

 

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AGL AWARDS

Golden Ball - best Emirati player: Khalfan Mubarak (Al Jazira)
Golden Ball - best foreign player: Igor Coronado (Sharjah)
Golden Glove - best goalkeeper: Adel Al Hosani (Sharjah)
Best Coach - the leader: Abdulaziz Al Anbari (Sharjah)
Fans' Player of the Year: Driss Fetouhi (Dibba)
Golden Boy - best young player: Ali Saleh (Al Wasl)
Best Fans of the Year: Sharjah
Goal of the Year: Michael Ortega (Baniyas)

The End of Loneliness
Benedict Wells
Translated from the German by Charlotte Collins
Sceptre

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How to watch Ireland v Pakistan in UAE

When: The one-off Test starts on Friday, May 11
What time: Each day’s play is scheduled to start at 2pm UAE time.
TV: The match will be broadcast on OSN Sports Cricket HD. Subscribers to the channel can also stream the action live on OSN Play.

U19 World Cup in South Africa

Group A: India, Japan, New Zealand, Sri Lanka

Group B: Australia, England, Nigeria, West Indies

Group C: Bangladesh, Pakistan, Scotland, Zimbabwe

Group D: Afghanistan, Canada, South Africa, UAE

UAE fixtures

Saturday, January 18, v Canada

Wednesday, January 22, v Afghanistan

Saturday, January 25, v South Africa

UAE squad

Aryan Lakra (captain), Vriitya Aravind, Deshan Chethyia, Mohammed Farazuddin, Jonathan Figy, Osama Hassan, Karthik Meiyappan, Rishabh Mukherjee, Ali Naseer, Wasi Shah, Alishan Sharafu, Sanchit Sharma, Kai Smith, Akasha Tahir, Ansh Tandon

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