Ultra-Loose Monetary Policy Is Here to Stay, Reaffirms Federal Reserve Chairman Jerome Powell

“No one can really identify” a bubble has been Jerome Powell’s response to whether the stock markets are overheated.


Federal Reserve Chairman Jerome Powell has reaffirmed that the central bank's ultra-easy money policies will continue until the economy has recovered further.

“The economy is a long way from our employment and inflation goals,” said Powell in testimony to the Senate Banking Committee.

Powell delivered the semiannual monetary policy report to members of the committee on Tuesday, and he is set to do the same Wednesday at a hearing of the House Financial Services Committee.

Reiterating his views, he said, the Fed will also maintain its support with large assets purchase and near-zero interest rates until “substantial further progress has been made,” which, according to him, “is likely to take some time.”

The central bank is currently buying $120 billion of assets per month and has pledged to keep up this pace until substantial progress has been made towards the goal of 2% inflation and maximum employment.

The Chairman also played down the concerns of a rise in inflation from another big fiscal stimulus package. As for the recent run-up in bond yields that has been unsettling the stock market, he called it “a statement of confidence” in a robust economy and “ultimately complete recovery.”

Markets have been volatile in the aftermath of Powell’s opening statement text release, with USD around 90 and 10-year yields rising only to fade those gains soon after.

Gold meanwhile remains boring at around $1,800, with tech company shares on a decline. Tesla shares also fell, turning red for the year. The electric car maker company invested $150 billion in Bitcoin earlier this year.

On the question of whether the S&P 500 index, which is up over 70% from March lows, is overheated, Powell said he doesn’t have an opinion. “No one can really identify” a bubble, he said.

He did acknowledge that loose monetary policy aided in pushing the prices up but added other forces were also at play, such as expectations of faster economic growth.

Bitcoin, meanwhile, is already back over $50,000 after experiencing a 23% drop from Sunday’s all-time high of around $58,300 to just under $45k.

“While we should not underestimate the challenges we currently face, developments point to an improved outlook for later this year,” Powell said.

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