Powell notes economic improvement but says the pandemic is still risky


June 23, 2021: -Federal Reserve Chairman Jerome Powell said in testimony prepared for delivery to Congress this week that the economy is increasing but faces continued threats from the coronavirus pandemic.

The central bank leader also highlighted the increasing inflation pressures that he expects to lessen with time.

As the economy is getting from the pandemic, he pledged continued support from policies the Fed put into place in the first days of the Covid-19 threat.

“Since we last met, the economy has shown sustained improvement,” Powell said he would deliver to the House Select Subcommittee on the Covid-19 Crisis on Tuesday.

“Widespread vaccinations have joined unprecedented monetary and fiscal policy actions provides strong support to the recovery. Indicators of economic activity and employment keep strengthening, and real GDP this year appears to be on the right path to post its fastest rate of increase in decades,” he said. “Much of this rapid growth reflects the continued bounce in activity from depressed levels,” he added.

Though vaccines have dramatically slowed the speed at which the virus has spread through the nation, he said threats remain.

“The pandemic keeps posing risks to the economic outlook,” he added. “Progress on vaccinations has limited the spread of COVID-19 and will continue to decrease the effects of the public health crisis on the economy. However, the speed of vaccinations has decreased, and new strains of the virus remain a risk.”

The Fed kept its benchmark short-term lending rate anchored near zero and purchased nearly $120 billion of bonds every month.

But last week’s Federal Open Market Committee meeting indicates that members look ahead to when they will start pulling back on policy accommodation.

Powell said price pressures have increased “notably” but repeated his belief that after certain factors ease, inflation will drift back to the Fed’s longer-term 2% target.

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