The US central bank would wait until the economy has “all but fully recovered” to pull back the extraordinary monetary support it rolled out in response to the COVID-19 pandemic, US Federal Reserve Chairman Jerome Powell said on Thursday.
“As we make substantial further progress toward our goals, we’ll gradually roll back the amount of Treasury and mortgage-backed securities we’re buying, and then in the longer run, we’ve set out a test that will enable us to raise interest rates,” Powell said in an interview on US National Public Radio’s Morning Edition show.
“We will — very, very gradually, over time, and with great transparency, when the economy has all but fully recovered — we will be pulling back the support that we provided during emergency times,” Powell said.
Photo: Reuters
Data released later on Thursday showed that applications for US unemployment benefits fell to the lowest in a year in the week ended on Saturday last week, signaling improvement for the labor market, as vaccinations accelerate and business restrictions ease in many states.
The Fed chief and his colleagues on the central bank’s policy-setting Federal Open Market Committee (FOMC) held interest rates near zero at the conclusion of their policy meeting last week and reiterated guidance that they would maintain their massive bond-buying campaign at a US$120 billion monthly pace until “substantial further progress” had been achieved on their goals for employment and inflation.
Longer-term interest rates have been on the rise since the Democratic Party won control of the US Senate in January, as investors have speculated that the Fed’s timeline for withdrawal of stimulus might be pulled forward, thanks in large part to the US$1.9 trillion relief package signed into law early this month.
Powell, in his fourth time speaking publicly this week, said during the interview that upgraded economic projections published following last week’s meeting reflected an acceleration in vaccinations against COVID-19 and the historic fiscal support from Washington.
The projections showed that Fed officials expect economic growth of 6.5 percent this year, which would mark the fastest annual pace of expansion since 1983.
They also revealed that seven of 18 FOMC participants expected it would be appropriate to begin raising rates by the end of 2023 — up from five in December last year, when the last round of projections was published.
“We’ve seen something like 85 million Americans have now had at least one shot. Daily shots are running at 2.5 million, and that’s going to enable us to reopen the economy sooner than might have been expected,” Powell said.
“The amount of fiscal support the economy has received is historically large, and that’s going to result in higher economic activity and hiring,” he said. “I’d want Congress to get the bulk of the credit here.”
The FOMC’s latest policy statement says it would not begin raising rates “until labor-market conditions have reached levels consistent with the committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.”
Powell referred to that guidance during the interview when asked whether all of the money the Fed and US Congress have pumped into the economy to counter the effects of the pandemic would result in higher inflation.
“We are strongly committed to inflation that averages 2 percent over time,” he said. “If it were to be higher or lower than that, then we’d use our tools to move inflation back to 2 percent.”
Three experts in the high technology industry have said that US President Donald Trump’s pledge to impose higher tariffs on Taiwanese semiconductors is part of an effort to force Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) to the negotiating table. In a speech to Republicans on Jan. 27, Trump said he intends to impose tariffs on Taiwan to bring chip production to the US. “The incentive is going to be they’re not going to want to pay a 25, 50 or even a 100 percent tax,” he said. Darson Chiu (邱達生), an economics professor at Taichung-based Tunghai University and director-general of
‘LEGACY CHIPS’: Chinese companies have dramatically increased mature chip production capacity, but the West’s drive for secure supply chains offers a lifeline for Taiwan When Powerchip Technology Corp (力晶科技) entered a deal with the eastern Chinese city of Hefei in 2015 to set up a new chip foundry, it hoped the move would help provide better access to the promising Chinese market. However, nine years later, that Chinese foundry, Nexchip Semiconductor Corp (合晶集成), has become one of its biggest rivals in the legacy chip space, leveraging steep discounts after Beijing’s localization call forced Powerchip to give up the once-lucrative business making integrated circuits for Chinese flat panels. Nexchip is among Chinese foundries quickly winning market share in the crucial US$56.3 billion industry of so-called legacy
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday held its first board of directors meeting in the US, at which it did not unveil any new US investments despite mounting tariff threats from US President Donald Trump. Trump has threatened to impose 100 percent tariffs on Taiwan-made chips, prompting market speculation that TSMC might consider boosting its chip capacity in the US or ramping up production of advanced chips such as those using a 2-nanometer technology process at its Arizona fabs ahead of schedule. Speculation also swirled that the chipmaker might consider building its own advanced packaging capacity in the US as part
A move by US President Donald Trump to slap a 25 percent tariff on all steel imports is expected to place Taiwan-made steel, which already has a 25 percent tariff, on an equal footing, the Taiwan Steel & Iron Industries Association said yesterday. Speaking with CNA, association chairman Hwang Chien-chih (黃建智) said such an equal footing is expected to boost Taiwan’s competitive edge against other countries in the US market, describing the tariffs as "positive" for Taiwanese steel exporters. On Monday, Trump signed two executive orders imposing the new metal tariffs on imported steel and aluminum with no exceptions and exemptions, effective