At its meeting in late January, the U.S. Federal Reserve left interest rates and its bond-buying policies unchanged amid signs that the American economic recovery has stumbled.
“Following a sharp rebound in economic activity last summer, the pace of the recovery has moderated in recent months, with the weakness concentrated in the sectors of the economy most adversely affected by the resurgence of the virus and by greater social distancing,” Fed chair Jerome Powell said at a press conference following the meeting, quoted by the Wall Street Journal.
“The economy is a long way from our inflation and employment goals and is likely to take some time for further substantial progress to be achieved,” he acknowledged.
Fed officials believe the slowdown is temporary and will leave current loose money and bond market support policies in place because “there are people out there who have lost their jobs,” Powell said. “It is essential that we get them back to work as quickly as possible.”
Playing the vax card, as we have noted since it got rushed to market, the Fed Chair emphasized to make that happen, “nothing [is] more important to the economy right now than getting people vaccinated.”
“Getting the pandemic under control… is the single most important growth policy we can have,” he said, “getting everyone vaccinated, getting people to wear masks, and all that.”
The ongoing vaccination campaign eventually will bring airlines, hotels, restaurants, and other face-to-face businesses back to life; but the slow initial pace of the vaccine distribution means that “it’s going to be a struggle.”
Powell’s comments snuffed out conjectures that the Fed might ease its bond-buying program or nudge up interest rates any time soon.
Any talk of tapering is “premature,” Powell said and reiterated his past pledge that any changes to the Fed’s bond-buying program would be announced far in advance.
On 28 January, the day Powell made his comments, U.S. stock markets booked their worst day of the year, with prices sliding as Powell spoke. The S&P 500 index dropped 3 percent, its biggest one-day loss since October.
Powell said that the greatest economic pain was in the short term, implying confidence in a stronger recovery during the second half of this year.
He also added the Fed would not change policies based on any one quick improvement, even if that means allowing inflation to rise faster than the bank’s stated 2-percent target.
“Frankly, we welcome slightly higher inflation,” Powell said.
Powell and Janet Yellin, Powell’s predecessor as Fed chair and now U.S. treasury secretary, have called for continued government stimulus to goose the economy now and deal later with massive deficits and the prospect of inflation.
Asked about financial stability in the wake of the GameStop stock scam and the overheated housing market, Powell said “financial stability vulnerabilities are overall moderate.”
The Fed’s low-interest rates have helped drive a home-buying boom that has jacked home prices 9.5 percent year over year by November 2020, the sharpest rise since 2011, and created a shortage of available houses for sale and rising stock markets.
In his briefing, Powell attributed recent hikes in stock prices to fiscal stimulus and news of the vaccines’ distribution, not Fed policies.
Once recovery is in place and markets are stable, there are likely to be structural and employment issues for policymakers to address, he noted, saying “we’re learning that technology can replace people even more than we thought.”
TREND FORECAST: Before this week’s bounce, pessimism was building on The Street. There is broad acknowledgment that massive money pumping by the Fed, its purchases of $80 billion of Treasuries, and $40 billion of mortgage-backed securities every month and low-interest rates are artificially propping up the markets and that a bubble has been created.
A wild card event, be it war in the Middle East with Iran or unpredictable new rounds of GameStop-like maneuvers, an unexpected jolt, outside the controllable of money junkies and Banksters, will burst the artificially-inflated bubble… crashing the markets and sinking nations swiftly and deeper into the “Greatest Depression.”
TRENDPOST: If Chairman Powell read the Trends Journal, he would already know how quickly machines are taking jobs from human workers.
Walmart has just announced plans to establish local warehouses staffed by robots in or next to existing stores to fulfill the rising tide of online grocery shopping and other orders as the company competes with Amazon.
Walmart’s online sales soared 79 percent in 2020’s third quarter compared to a year earlier, the company reported.
Robots will pull routine items, such as boxes of cereal or Xbox game controllers; people will select fresh produce and handle similarly more delicate or complex chores. Orders can be picked up by customers or delivery drivers.
Walmart also is mulling automated pickups, in which robots would shuttle orders to a hatch that a human could open by scanning with a smartphone.
The localized, automated warehouses are designed to reduce the so-called “last mile” costs, the most expensive part of order fulfillment, which gets goods from stores into customers’ hands.
Walmart estimates that robots and other forms of automation will cut the cost of filling orders by as much as 75 percent, the Wall Street Journal reported.
