Powell’s latest talk: I don’t know if the non-agricultural will be so strong, the data will continue to exceed expectations, and interest rates will be raised more
News from the Financial Associated Press, February 8 (edited by Shi Zhengcheng)At 1:40 a.m. Beijing time on Wednesday, Federal Reserve Chairman Powell attended an interview at the Economic Club of Washington, responding to the commotion caused by last week’s non-agricultural report.
At the press conference after the Fed’s interest rate decision last week, Powell emphasized in his speech that he would “raise interest rates several times” and would not cut interest rates within the year, but the market paid more attention to the description of “downward inflation has begun”. As the non-agricultural data exceeded expectations last Friday, the fear of a strong interest rate hike resurfaced again, triggering a tremor in the capital market. Because of this, Powell’s speech today is also particularly valued by the market.
As an opening question,The moderator directly asked Powell if he knew that Friday’s non-agricultural data would be so strong when he raised interest rates by 25 basis points last week.
Powell explained,The message released by the FOMC meeting last week was that “the process of declining inflation has begun”, but the decline in inflation will be a long journey, and it has just begun, and the prices of service industries except real estate have not yet shown signs of softening . Therefore, the Fed has been emphasizing that the process of falling inflation will be full of bumps, and it will continue to raise interest rates in the future, and it will remain in a restrictive range for a period of time.
Regarding last week’s non-agricultural data, Powell emphasized that while it was unexpected, he also said that no one he knew could have expected this. But this incident itself can explain why the Fed believes that the process of reducing inflation will be very long. But that’s also a good thing, financial conditions have tightened significantly against the backdrop of an extremely strong labor market, while inflation remains on the downside. certainly,If the economic data continues to exceed expectations, then the Fed is bound to raise interest rates more.
Powell also took this opportunity to reveal to the outside world the working form of the Federal Reserve FOMC. Typically, during the two-day meeting, committee members discuss the economic situation on the first day and monetary policy on the second day, usually at lunchtime. When the FOMC meets, Powell will be the last to speak on the first day, but the first to speak when discussing monetary policy.
Then Powell also talked about “why the unemployment rate in the United States has not risen”. The chairman of the Federal Reserve said that low unemployment indicates a good economy, which in itself is a good thing. At present, the demand in the US job market is 5 million more than the supply, which was not the case before the epidemic.The current shortage of American workers feels “almost structural.”
According to the non-agricultural data released last Friday, the U.S. unemployment rate unexpectedly fell to 3.4% in January this year, which is also a new low since 1969.
(U.S. unemployment rate, source: tradingeconomics) Powell, who was prepared, also revealed that the latest Fed balance sheet size is 8.4 trillion US dollars. As the bonds on the account mature, the size of the assets will also decrease. At present, the Fed does not have a clear goal of shrinking its balance sheet, but the entire process of shrinking its balance sheet may last for many years.As for actively selling bonds, it is not currently something the Fed is actively considering.
Powell also further discussed what the “data” the Fed often refers to is. In addition to regular economic data, the 12 local Feds also have access to various industries. When the FOMC meets, they will come to the Fed with what they have seen and heard and tell Powell the current economic story in the United States.
In addition to looking at economic data, Powell revealed that he usually reads light novels, detective stories, spy novels, etc., and also rides a bicycle and plays the guitar. The chairmanship of the Federal Reserve is also his first time as a public figure, and while he always thinks his jokes are funny, he still needs to be careful when he appears in public. As the head of interest rate issues, he is often asked about mortgage interest rates (“Should I buy a house now?”), but he really can’t answer.
Powell also revealed that Biden has never called him so far, but Trump (while in office) liked to come to him.