The President of the United States Federal Reserve (US), Jerome Powell, faced tough questions Thursday about inflation and banking regulation in a hearing before the Senate Banking Committee, matters that will likely come to light head-on. Possible to believe the situation.
Powell made the same promise of “strong support” to complete the US economic recovery that he made on Wednesday before the House Financial Services Committee, signaling that he sees no need to speed up the withdrawal of support. activity through the recent acceleration in inflation.
However, Republicans on the committee continued to challenge Powell over whether the sharp acceleration in inflation would be temporary, as the Fed hopes.
“The current Fed model almost guarantees that it will lag by keeping inflation steady at the central bank’s average target of 2%,” said Pat Tomey, a Republican senator from Pennsylvania.
The central bank’s $120 billion monthly bond-buying program, especially mortgage-backed securities, is “puzzling” at a time when housing prices are rising sharply.
The committee chair, Democrat Sherrod Brown of Ohio, argued in his opening statement and in questions to Powell that the central bank had weakened regulation of major banks, allowing them to raise dividends and buy back shares.
“The Fed reversed important safeguards, making it easier for banks to increase their stock prices,” Brown said.
For his part, Powell said the Fed is closely following the trajectory of inflation, but considers it “unique in history,” being a derivation of reopening in a pandemic, so it is unlikely to continue. He also noted that the level of capital that banks must currently hold, which is not available for dividends or other payments, is “correct”.
Powell’s oversight of potentially too much of an economy will be central to the Joe Biden administration’s decision to rename it for a second four-year term when the current term ends in early 2022.
On the other hand, the Federal Reserve Chairman commented that he had not made a decision on the advantages or disadvantages of creating a central bank digital currency, but emphasized that he wanted congressional authorization before taking any action in this regard.
“I am legitimately hesitant whether the benefits outweigh the costs or vice versa.”
He explained that if the Fed released its own digital currency, “we would like to have broad support in the community and in Congress, and it would be better if it took the form of delegating legislation, rather than having to make a very careful reading of the (existing) law.” The US Central Bank on this matter.
Inflation will fall…
For her part, US Treasury Secretary Janet Yellen raised concerns about housing affordability and said she expects several more months of high inflation readings, which will be temporary, adding that the Federal Reserve has been doing a good job, I am working under President Jerome Powell.
“I think we will have several more months of high inflation, and I am not saying that this is a one-month phenomenon. But I think that in the medium term we will see inflation return to a normal level. But of course we have to watch it carefully.”
Regarding the Fed’s performance, he commented, “I have a lot of respect for the Fed and it’s important for them to make independent judgments about what is appropriate.”
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