Powell's first speech after the FOMC meeting: without mentioning the prospect of monetary policy, the US economy is undergoing a "fundamental transformation"

Source: Wall Street

Powell said he had never really seen such a serious supply chain problem or that the US economy was accompanied by such a severe labor shortage. Although he did not disclose his views on the outlook for the economy or monetary policy, he stressed that the US economy was facing uncertainty.

On Friday, September 24, Federal Reserve Chairman Colin Powell delivered an opening speech at the "Fed listen" online event. Although he did not elaborate on his views on the outlook for the economy or monetary policy, he stressed that the US economy is facing uncertainty and needs to adapt to the "new reality".

Powell said in a short speech that the recession caused by the COVID-19 epidemic was one of the worst and shortest crises in US history, and that the rapid economic recovery that followed was unprecedented. Over the past 18 months, the epidemic has caused a variety of damage to companies, including changes in the workplace, fundamental shifts in the mode of operation of certain industries by health and epidemic prevention requirements, and changes in consumer behaviour caused by uncertain prospects.

He reiterated "organic in danger", saying that the business plans of US companies have been reformulated, people's outlook for the future has been revised, and the future is still full of uncertainty.The US economy is undergoing a "fundamental transformation" as people and businesses turn to "meet the needs of the new reality". He added that he had never really seen such a serious supply chain problem or that the US economy was accompanied by such a severe labor shortage.

On Wednesday, the Fed mentioned for the first time in its bond-buying guidelines in its policy statement that the pace of adjusting asset purchases could soon be guaranteed if employment and inflation progress continued as expected, meaning the Fed said it was "likely to reduce QE soon". Powell also said at a press conference that taper (reduced bond purchases) was announced as early as November, and that super employment was not needed to meet the opening criteria.

He also reiterated again and againReduce the starting time and pace of bond purchases/The roadmap is not when to raise interest rates in the future.“Direct signal”The prerequisites for raising interest rates“Different from cutting back on bond purchases, and more stringent”，At least at the end of the minus code.QEInterest rates will not be raised before.He also said that the Fed is focusing on when to start taper at this stage and has not yet made a decision on a longer-term solution to its balance sheet.

The "Fed listen" series, which began in 2019, aims to adjust the Fed's policy framework by communicating with representatives of various industries. Today's event is about discussing with different communities how the US economy is recovering from the epidemic.

Before Powell's speech, Mestre, chairman of the Cleveland Federal Reserve and the voting committee of the 2022 FOMC, expressed support for the Fed to scale back its bond purchases from November this year, and the taper is expected to be completed in the first half of next year.

This is similar to Powell's view at Wednesday's press conference that taper has "broad support" within the Fed and that it may be appropriate to end the gradual downsizing of QE around mid-2022 as long as the economic recovery remains on track. The remark was once thought to be hawkish.

During a series of speeches by Fed officials, US Treasury prices fell at the beginning of the session, with 10-year and 30-year yields rising to intraday highs, with 10-year base bond yields breaking through 1.46 per cent at one point, the highest since July.

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