US Federal Reserve Chairman Jerome Powell on Wednesday said it was still too soon to scale back the central bank’s aggressive support for the US economy, while acknowledging that inflation has risen faster than expected.
“At our June meeting, the committee discussed the economy’s progress toward our goals since we adopted our asset purchase guidance last December,” Powell told the US House of Representatives Financial Services Committee. “While reaching the standard of ‘substantial further progress’ is still a ways off, participants expect that progress will continue.”
Throughout the three-hour virtual hearing, Powell was peppered with questions from Republican and Democratic US lawmakers on rising prices.
Critics say that inflation is being fanned by the Fed holding interest rates near zero while buying US$120 billion of Treasuries and mortgage-backed securities every month.
Powell said that while Fed officials expect high inflation to be temporary, they would react if inflation turned out to be persistently and materially above the central bank’s 2 percent target.
“There’s nothing in the guidance or our framework that would prevent us from doing the right thing at the right time,” he said.
Powell was to face more questions from the US Senate banking panel yesterday.
Powell “is trying to push back on this idea on that they are under pressure to exit or that they have decided to taper soon,” said Priya Misra, head of global rates strategy at TD Securities in New York. “He said the labor market has a long way to go.”
Republican lawmakers asked Powell to explain how monetary policy could ease supply bottlenecks blamed for rising prices, or if the Fed’s bond buying was distorting financial markets.
Powell said that he would be watching to see if labor supply increases as enhanced unemployment benefits expire in coming months, adding that he was willing to look through the current shortages, and effects on wages and prices if necessary.
“Even after this supply comes, it is still likely that we will still be short of maximum employment,” Powell said. “That is why we don’t see that is time to raise interest rates now.”
Ten-year Treasuries yields edged lower to about 1.35 percent as Powell testified and US stocks closed near all-time highs.
US government data released on Tuesday showed that prices paid by US consumers last month surged by the most since 2008, increasing 5.4 percent from the same month last year.
“Strong demand in sectors where production bottlenecks or other supply constraints have limited production has led to especially rapid price increases for some goods and services, which should partially reverse as the effects of the bottlenecks unwind,” Powell said on Wednesday.
He also noted that asset prices and risk appetite have risen, while downplaying any near-term risks to the economy from financial markets.
Powell’s remarks before the US Congress this week are his last semi-annual testimonies before US President Joe Biden decides whether to give him another four years at the Fed helm or pick someone else.
Powell’s tenure as chairman expires in February next year.
Taiwan’s technology protection rules prohibits Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) from producing 2-nanometer chips abroad, so the company must keep its most cutting-edge technology at home, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. Kuo made the remarks in response to concerns that TSMC might be forced to produce advanced 2-nanometer chips at its fabs in Arizona ahead of schedule after former US president Donald Trump was re-elected as the next US president on Tuesday. “Since Taiwan has related regulations to protect its own technologies, TSMC cannot produce 2-nanometer chips overseas currently,” Kuo said at a meeting of the legislature’s
GEOPOLITICAL ISSUES? The economics ministry said that political factors should not affect supply chains linking global satellite firms and Taiwanese manufacturers Elon Musk’s Space Exploration Technologies Corp (SpaceX) asked Taiwanese suppliers to transfer manufacturing out of Taiwan, leading to some relocating portions of their supply chain, according to sources employed by and close to the equipment makers and corporate documents. A source at a company that is one of the numerous subcontractors that provide components for SpaceX’s Starlink satellite Internet products said that SpaceX asked their manufacturers to produce outside of Taiwan because of geopolitical risks, pushing at least one to move production to Vietnam. A second source who collaborates with Taiwanese satellite component makers in the nation said that suppliers were directly
Top Taiwanese officials yesterday moved to ease concern about the potential fallout of Donald Trump’s return to the White House, making a case that the technology restrictions promised by the former US president against China would outweigh the risks to the island. The prospect of Trump’s victory in this week’s election is a worry for Taipei given the Republican nominee in the past cast doubt over the US commitment to defend it from Beijing. But other policies championed by Trump toward China hold some appeal for Taiwan. National Development Council Minister Paul Liu (劉鏡清) described the proposed technology curbs as potentially having
EXPORT CONTROLS: US lawmakers have grown more concerned that the US Department of Commerce might not be aggressively enforcing its chip restrictions The US on Friday said it imposed a US$500,000 penalty on New York-based GlobalFoundries Inc, the world’s third-largest contract chipmaker, for shipping chips without authorization to an affiliate of blacklisted Chinese chipmaker Semiconductor Manufacturing International Corp (SMIC, 中芯). The US Department of Commerce in a statement said GlobalFoundries sent 74 shipments worth US$17.1 million to SJ Semiconductor Corp (盛合晶微半導體), an affiliate of SMIC, without seeking a license. Both SMIC and SJ Semiconductor were added to the department’s trade restriction Entity List in 2020 over SMIC’s alleged ties to the Chinese military-industrial complex. SMIC has denied wrongdoing. Exports to firms on the list