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Yields US Treasury bonds are trading stable after the appearance of the head of the Fed before the US Congress

Bloomberg

Fed will continue to buy bonds even if the outlook improves: Powell

(Bloomberg) – Federal Reserve Chairman Jerome Powell said the central bank was not considering withdrawing its support for the pandemic-hit national economy, though he expressed expectations of a return to more normal and improved activity by the end. “The economy is very far from our targets for employment and inflation, and it will likely take some time for substantial progress to be made,” he says in the text of the testimony he will deliver Tuesday before the Senate Banking Committee. The Fed is currently buying $ 120 billion in assets per month ($ 80 billion in Treasury securities and $ 40 billion in mortgage-backed debt) and has pledged to maintain this pace “until substantial progress has been made towards its targets. peak employment and 2% inflation. Powell’s testimony came against a backdrop of growing optimism about the economy as coronavirus vaccines are more widely distributed and on expectations of greater fiscal stimulus from President Joe Biden and Congress.Inflation ExpectationsBond yields have risen due to better economic prospects and in anticipation of faster inflation. Some traders have also voiced expectations of the Fed’s first interest rate hike since it effectively cut them to zero last year. There was price volatility following the release of Powell’s opening statement, with yields at 10 years that initially rose a couple of basis points to session highs of 1.3875%, before the move quickly faded and yields fell again by roughly the same amount. “While we should not underestimate the challenges we currently face , developments point to a better outlook later this year, “Powell said. “In particular, continued progress in vaccines should help accelerate the return to normal activities.” The economy started 2021 strong, as retail sales and factory production accelerated. Faced with stronger data, Bloomberg Economics last week boosted its 2021 growth forecast to 4.6% from 3.5%, and said it could rise to 6% -7% if the US Biden aid package is enacted. $ 1.9 trillion. However, the labor market is weaker and claims for unemployment benefits have soared to a four-week high in the most recent period. Last month, payrolls hardly increased, only by 49,000, after a decrease of 227,000 in December. While unemployment fell to 6.3%, in part it reflected more people leaving the workforce. “The high level of unemployment has been particularly severe for lower-paid workers and for African Americans, Hispanics and other minority groups.” Powell said. “The economic dislocation has changed many lives and created great uncertainty about the future.” He reiterated the Fed’s promise to keep interest rates close to zero until the labor market has reached peak employment and inflation has risen to 2 %, and is expected to moderately exceed that level for some time.Original Note: Powell Signals Fed to Keep Buying Bonds Even as Outlook ImprovesFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source. © 2021 Bloomberg LP

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