Federal Reserve Chair Jerome Powell is scheduled to appear before the House Select Subcommittee on the Coronavirus Crisis later Tuesday to discuss the central bank’s response to the pandemic.
In prepared remarks, Powell noted the economy has shown sustained improvement since he last appeared before the committee, citing widespread Covid-19 vaccinations as well as unprecedented monetary and fiscal policy actions.
“Indicators of economic activity and employment have continued to strengthen, and real GDP this year appears to be on track to post its fastest rate of increase in decades,” Powell said.
“Much of this rapid growth reflects the continued bounce back in activity from depressed levels,” he added. “The sectors most adversely affected by the pandemic remain weak, but have shown improvement.”
Labor market conditions have continued to improve along with overall economic activity, Powell said, although he noted the pace has been uneven.
Powell said the 5.8 percent unemployment rate in May understates the shortfall in employment, particularly as labor market participation has not moved up from the low rates that have prevailed for most of the past year.
“Job gains should pick up in coming months as vaccinations rise, easing some of the pandemic-related factors currently weighing them down,” he said.
Powell acknowledged inflation has increased notably in recent months but reiterated the view that the jump is due to “transitory” factors and predicted inflation would drop back toward the Fed’s longer-run goal of 2 percent price growth.
The Fed chief warned the coronavirus pandemic continues to pose risks to the economic outlook, pointing to the slowing pace of vaccinations and new strains of the virus.
Powell stressed that the Fed will do “everything we can to support the economy for as long as it takes to complete the recovery.”
The testimony by Powell comes after the latest projections from the Fed pointed to an increase in interest rates in 2023.
The latest projections from Fed officials released last Wednesday suggest interest rates will be increased to 0.6 percent in 2023 compared to previous projections indicating rates would remain at near-zero levels.
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