Tuesday, in day one of his testimony before Congress, Powell told the U.S. Senate Committee on Banking, Housing, and Urban Affairs the path of the economy continues to depend significantly on the course of the virus and the measures undertaken to control its spread.
Gold prices are seeing little reaction to his comments. April gold futures last traded $1,804.90 an ounce, down 0.20% on the day. Gold was under pressure ahead of the release of Powell’s prepared remarks.
Recently optimism has picked up that the U.S. economy could see a faster than expected growth as it recovers from the COVID-19 pandemic; however, Powell noted that the nation still faces difficult challenges as activity has slowed in recent months.
“The economic recovery remains uneven and far from complete, and the path ahead is highly uncertain,” he said.
Regarding monetary policy, markets were looking for any comments related to the recent sharp rise in bond yields; however, Powell did not comment on any potential capping of bond yields in his prepared remarks.
He reiterated his stance that the Federal Reserve is ready to use all of its tools to support its gold for maximum employment and for inflation to average 2%.
“As noted in our January policy statement, we expect that it will be appropriate to maintain the current accommodative target range of the federal funds rate 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,” he said.
“The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved. We will continue to clearly communicate our assessment of progress toward our goals well in advance of any change in the pace of purchases,” he added.
Adam Button, head of currency strategy at Forexlive.com, said that Powell hasn’t said anything new on monetary policy. He added that bond yields continue to move higher in reaction to Powell’s prepared remarks.
Although Powell has stuck to a relatively dovish tone, Avery Shenfeld, senior economist at CIBC, said that there was really nothing that is grabbing the market’s attention.
Paul Ashworth, chief U.S. Economist, described Powell’s statement of overwhelmingly dovish.
“The Fed won’t slow the pace of its asset purchases until next year, with interest rate hikes still several years away,” he said.
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