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Fed’s Powell: We Have All But Met The Test For Taper


Today we received some comments from the Chair of the Federal Reserve of the United States Jerome Powell, below is a summary of what he spoke on along with some key quotes.

Inflation

The supply-side constraints that are at the root of inflation have gotten worse. Before inflation can be brought down, supply bottlenecks must be resolved. I believe inflation will decrease. There is still a link between inflation and employment, but it is weaker than in the past. The current inflation is unrelated to the Phillips curve. Inflation is high, and the unemployment rate is high.

Banks

It would be wonderful if any central bank digital money got Congressional authorization. I don’t believe the stress test has been weakened. Any adjustments to bank stress tests are not something I regret. The largest banks’ capital is at multi-decade highs. Leverage ratios should not be a legally obligatory requirement for banks and the Supplemental leverage ratio must be used with caution. Fed’s Powell when asked if the Fed regional banks should be subject to FOIA: I’d like to think about it.

Additional Key Quotes From Powell

The Fed will not be able to protect the American people from a default if the debt limit is not raised. It is critical to raise the debt ceiling; the consequences of failing to do so would be disastrous.

Transportation bottlenecks are a big contributor to pricing increases

Cyber danger poses a possible systemic risk to the financial system; we need to be prepared.

Customizing liquidity requirements was not a bad idea, but it should be reconsidered. We attentively examined Archegos’ scenario and drew conclusions from it

The test for increasing rates is higher.

Even with the taper, we’d be adding accommodation until the middle of next year. We have all but met the test for taper.

In my opinion, we are still a long way from full employment.



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