Powell says US Fed to aggressively use QE to combat next recession

A Peek Into The Markets US Stock Futures Climb Ahead Of Powell's Testimony

Powell said that the United States unemployment rate is approaching its lowest levels in half a century, and companies are increasingly ready to recruit and train insufficiently skilled workers. "You have a squeeze going on, to do with difficulty in getting lots.

That means it is much more likely that we will have to turn to the tools that we used in the financial crisis when we hit the lower bound", Powell told lawmakers before the Senate Banking Committee.

The Fed's benchmark rate is in a historically low range of 1.5% to 1.75%.

The tools include "forward guidance, which says that we will keep rates low, and that it is also large-scale asset purchases of longer-term securities to drive longer rates down and support the economy", he explained, adding the central bank will use those tools aggressively to fight the next recession.

Sen. Mark Warner, Democrat from Virginia, said that many other government institutions are "under assault" from the Trump administration, citing White House attacks on intelligence agencies and turmoil at the Justice Department over the prosecution of Trump's associate Roger Stone.

He said the Fed is focused only on achieving its goals of full employment and stable prices.

"Our traditional tool, of course, is interest rates".


Trump has repeatedly criticized the Fed chair since announcing that he had nominated Powell in 2017, a break with tradition in recent history.

Three questions will determine whether it is possible, he noted: if "global trade policy uncertainty has sufficiently been dampened to now encourage global manufacturing"; "interest-sensitive sectors in the USA will respond to the 2019 change in US monetary policy"; and " whether the coronavirus outbreak in China is likely to be contained as other viral outbreaks have been".

In his remarks before the questions, Powell said, "we are closely monitoring the emergence of the coronavirus, which could lead to disruptions in China that spill over to the rest of the global economy". -China trade war and slower overseas growth.

Asked by Arkansas Republican Tom Cotton to detail how the coronavirus could impact US growth, Powell said. Though the just-released presidential budget projects a reduction over the next 10 years, it assumes 3 percent economic growth for years to come.

As long as incoming economic data "remains broadly consistent with this outlook, the current stance of monetary policy will likely remain appropriate," he said.

The Fed has cut interest rates three times since last summer to support the economy.

And the number of people working more than one job is at "a very, very high level right now", Powell said.

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