- Stocks Erase Gains On Powell’s Comments
- Fed Sees No Rate Hike, No Taper = Broad-Based U.S. Dollar Decline
- GBP Breaks 1.41 Despite Mixed Labor Data
- RBNZ Expected To Leave Monetary Policy Unchanged
Investors sold U.S. dollars after Federal Reserve Chairman Jerome Powell made it very clear on Tuesday that there will be no interest rate hikes or tapering in the foreseeable future. The U.S. economy is recovering, inflation is on the rise and with more Americans getting vaccinated, the outlook is bright. In fact, Powell expects to raise the Fed’s 2021 GDP forecast to the range of 6%. Yet, these improvements are not enough for the central bank to move away from its commitment to keep monetary policy easy until a sustainable recovery returns the economy to pre-COVID levels.
In his semi-annual testimony on the economy and monetary policy, Powell said substantial progress has not been made towards the central bank’s goals. The Fed is committed to using its full range of tools to support the economy and to help ensure that the recovery from this difficult period will be as robust as possible. Powell said job growth alone won’t drive its decision. Investors didn’t believe him when he said rates need to remain at current levels until the economy reaches maximum employment and inflation hits 2% in early February. Today, he said the bank wants to see inflation moderately above 2% for some time before tightening and when the time comes to change the pace of asset purchases, it will make its intentions very clear. There will be no surprises.
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