Powell Tells Senate the Fed Will Fight Inflation With ‘Normalized’ Policy, Massive Stimulus No Longer Needed

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Federal Reserve Chairman Jerome Powell offered encouraging remarks about the U.S. economy during a U.S. Senate confirmation hearing on Jan. 11, saying that the combination of fewer supply chain delays and “normalized” policy by the central bank will help tame inflation.

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Powell also suggested that aggressive federal stimulus packages — like those passed in 2020 and 2021 to help Americans deal with the COVID-19 pandemic — are no longer necessary to help prop up the economy. He pointed to strong employment numbers as evidence of the economy’s health, and also said the economy should weather the current omicron surge with only “short-lived” impacts.

“What that’s really telling us is that the economy no longer needs or wants the very highly accommodative policies that we’ve had in place to deal with the pandemic and its aftermath,” Powell told the Senate Committee on Banking, Housing and Urban Affairs. “We’re really just going to be moving over the course of this year to a policy that is closer to normal. But it’s a long road to normal from where we are.”

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To get back to normal, the U.S. must first figure out a way to deal with rising inflation, which is expected to top 7% in December, CNBC reported. To battle inflation, the Fed plans to scale back its asset purchases and raise interest rates.

“As we move through this year… if things develop as expected, we’ll be normalizing policy, meaning we’re going to end our asset purchases in March, meaning we’ll be raising rates over the course of the year,” Powell said. “At some point perhaps later this year we will start to allow the balance sheet to run off, and that’s just the road to normalizing policy.”

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Powell also said he’s optimistic that supply chain bottlenecks will ease this year, which will also help bring down inflation, The Wall Street Journal reported.

Powell was openly endorsed by both Republicans and Democrats on the Senate Banking Committee, which should lead to a likely confirmation for a second term as Fed chairman, according to Reuters.

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.
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