At his confirmation hearing in front of Congress today, Fed Chair Jerome Powell eased concerns and assured the public that the U.S. is ready for tighter monetary policy. 💡
To tackle high inflation, Powell restated the Fed’s plan to conduct interest rate hikes and taper monthly bond purchases — the market reacted well to the news, recovering some of yesterday’s losses. Powell’s hearing suggested that it is likely he will be appointed for a second term in his current position.
Previously, investors worried that the Fed’s aggressive tightening of monetary policy would result in a ‘triple threat’ that could damage the economy while reducing inflation. Specifically, investors were concerned that the Fed would reduce bond buying, taper asset purchasing, and increase interest rates all at once, which could have unintended consequences in the broader economy. Today, however, Powell emphasized his commitment to reducing inflation while balancing the greater economy, which somewhat appeased investors.
Powell stated “As we move through this year … if things develop as expected, we’ll be normalizing policy, meaning we’re going to end our asset purchases in March, meaning we’ll be raising rates over the course of the year. At some point perhaps later this year we will start to allow the balance sheet to run off, and that’s just the road to normalizing policy.”
Powell also revealed the Fed’s new ethics code in an effort to battle conflicts of interest among governing officials. You can watch a livestream of today’s hearing here. 🦅 🇺🇸