A broad economic recovery is all of a sudden collecting speed, calling countless Americans back to work. Thats the message tonight of Jerome Powell, the chair of the Federal Reserve. The “Fed,” as its known, manages our economy by controlling the supply of money, setting rate of interest and overseeing major banks. We took a seat with Chairman Powell in his Washington head office this previous Wednesday, one year after the COVID crash cleaned out 22 million jobs.Scott Pelley: Is the economy still in jeopardy?Jerome Powell: I would state this. What were seeing now is actually an economy that seems to be at an inflection point. And thats because of extensive vaccination and strong financial support, strong monetary policy support. We feel like were at a place where the economys ready to begin growing far more rapidly and job development being available in much more quickly. The primary threat to our economy right now truly is that the illness would spread once again. Its going to be clever if people can continue to socially use and distance masks.Scott Pelley: You seem to be stating, not about COVID, but about the economy, that were out of the woods.Jerome Powell: Well, I d say that we and a lot of economic sector forecasters see strong development and strong job production beginning today. Really, the outlook has actually lightened up substantially. Scott Pelley: What are your forecasts for growth and employment?Jerome Powell: If you take a look at what private sector forecasters are stating or what forecasters who relax this table who are on the Federal Open Market Committee, our rate setting committee, what theyre forecasting is growth for this year in the range of 6% or 7%, which would be the greatest level in, you know, 30 years. Or perhaps possibly a little bit higher. And forecasting joblessness to move down substantially from 6%, where it is now, maybe to in between 4% and 5%.
Jerome Powell, who chooses to be called “Jay” is 68– an attorney who made a fortune on Wall Street. And simply be like, you understand what I mean, “Things are never going to get better,” Scott Pelley: When does she, and everybody else like her, get their jobs back?Jerome Powell: You understand, there are something like 8.5, 9 million people, possibly even more than that depending on how you count it, who were working in February of last year prior to the pandemic and have lost their tasks. Have you seen them?Jerome Powell: Yes, I have.
Fed Chair on federal budget plan
Jerome Powell: We did not understand how the economy would perform. Scott Pelley: What do you believe wouldve occurred to the economy if the COVID Relief Bills had never ever passed?Jerome Powell: You know, I hate to even think. Jerome Powell: So I think if you look back a year ago to when we last spoke, the economys in fact carried out much better than we had actually feared.
Fed talked about how bad it would get
The Feds simple cash helped save the country, however cheap loaning can also sustain excessive danger taking in the stock markets. This year, financiers have actually obtained more than $800 billion to speculate in stocks. Last time there was a run up that fast was right before 2008s Great Recession.Scott Pelley: Is whats taking place in the stock exchange today in your view logical or is it a speculative bubble?Jerome Powell: We care for more comprehensive monetary stability, which includes a lot of things. How resistant is the financial system? How much capital? Just how much liquidity? How much risk management? Does it function in the face of considerable shocks? One other piece of it however, we do take a look at asset rates. And I would state, you know, some property prices are raised by some historic metrics. Naturally, there are people who think that the stock exchange is not over-valued, or it would not be at this level. We do not think we have the ability to determine asset bubbles completely. We focus on, what we focus on is having a strong monetary system thats durable to substantial shocks, including if worths were to go down.There was a shock last month when a personal hedge fund called Archegos, went bust after it obtained billions to speculate in stocks. The stocks included ViacomCBS. Banks that loaned Archegos the cash suffered enormous losses. Jerome Powell: This is an occasion that were keeping an eye on really thoroughly and dealing with regulators here and around the globe to comprehend thoroughly. Whats concerning about it however is, and surprising, honestly, is that a single consumer, customer, of among these large firms could lead to such considerable losses to these large companies in a service that is generally thought to present fairly well understood risks. So that is surprising and worrying. And, you know, were going to understand that and get to the bottom of it. Scott Pelley: The possibilities of a systemic breakdown like in 2008 are what today?Jerome Powell: The possibilities that we would have a breakdown that looked anything like that where you had banks making dreadful loans and investment choices and needing and having low levels of liquidity and weak capital positions, and hence requiring a government bailout, the opportunities of that are really, extremely low. Really low. But the world changes. The world evolves. And the dangers change too. And I would state that the risk that we keep our eyes on the most now is cyber danger. Thats really where the threat I would say is now, instead of something that appeared like the international monetary crisis.Scott Pelley: Well, when you talk about cyber risk, what are you talking about? What kind of scenarios are you looking at? Jerome Powell: There are situations in which a large monetary organization would lose the capability to track the payments that its making. Where you would have a part of the financial system come to a stop, or perhaps even a broad part. Therefore, we spend so much time and energy and money securing versus these things. There are cyber-attacks every day on all major institutions now. Thats a big part of the hazard photo in todays world.
Fed Chair on money-market funds
The Federal Reserve system, in its current form, was developed by Congress in 1935– the same time its Washington headquarters was developed as a task to develop jobs in the Great Depression. The Feds mandate is to keep the economy warm enough to produce maximum work however not so hot regarding trigger runway inflation.Scott Pelley: What the Fed has actually done generally is use financial models to predict inflation and after that raise interest rates, tap the brake if you will, prior to inflation happens. Is that what youre preparing on doing?Jerome Powell: No, its not. And really, what weve done is weve upgraded our understanding of the economy and for that reason, our policy structure to the way the economy has actually evolved. The economy has changed. And what we saw in the last number of cycles is that inflation never ever actually moved up as joblessness decreased. We had 3.5% joblessness, which is a 50-year low for much of the last two years prior to the pandemic. And inflation didnt truly react much. That implies that we can afford to wait to see real inflation appear before we raise rates of interest. Now, we do not desire inflation to go up materially above 2% and go back to, you understand, the bad, old inflation days that we had when you and I were in college back a long time ago. But at the exact same time, we do have the ability to wait to see genuine inflation. And thats what we prepare on doing.Scott Pelley: And when it hits 2%, how patient are you going to be?Jerome Powell: Well, what we stated was we want to see inflation move up to 2%. And we indicate that on a sustainable basis. Once, we dont indicate just tap the base. However then we d also like to see it on track to move reasonably above 2% for a long time. And the factor for that is we desire inflation to average 2% with time. And when we get that, thats when well raise rate of interest.
Fed Chair on Archegos collapse
We sat down with Chairman Powell in his Washington head office this previous Wednesday, one year after the COVID crash cleaned out 22 million jobs.Scott Pelley: Is the economy still in jeopardy?Jerome Powell: I would state this. Its going to be wise if individuals can continue to socially use and distance masks.Scott Pelley: You seem to be saying, not about COVID, but about the economy, that were out of the woods.Jerome Powell: Well, I d say that we and a lot of private sector forecasters see strong growth and strong task creation beginning right now. Scott Pelley: What do you think wouldve occurred to the economy if the COVID Relief Bills had never passed?Jerome Powell: You know, I hate to even think. Jerome Powell: So I believe if you look back a year ago to when we last spoke, the economys actually performed better than we had feared. Scott Pelley: At this minute in time, whats the best guarantee that you can make to the American people?Jerome Powell: Im in a position to guarantee that the Fed will do whatever we can to support the economy for as long as it takes to finish the recovery.Produced by Henry Schuster.
And now, we have a whole generation of Americans whove never seen quickly increasing interest rates or prices.Jerome Powell: Thats. Scott Pelley: So all the way through the end of this year, you would not see rates increasing?Jerome Powell: I believe its extremely unlikely we would raise rates anything like this year, no.Other members of the Fed board do not see a rate boost even in 2022. Scott Pelley: At this minute in time, whats the best warranty that you can make to the American people?Jerome Powell: Im in a position to ensure that the Fed will do everything we can to support the economy for as long as it takes to complete the recovery.Produced by Henry Schuster.