Breakingviews – Capital Calls: Jay vs. Larry


Federal Reserve Chair Jerome Powell speaks during a Senate Banking Committee hearing on Capitol Hill, Washington, U.S., December 1, 2020. Al Drago/Pool via REUTERS MANDATORY CREDIT

NEW YORK (Reuters Breakingviews) – Concise insights on global finance in the Covid-19 era.


JAY VS. LARRY. Jerome Powell is not worried about inflation. In a speech on Wednesday, the U.S. Federal Reserve chair said he planned to keep monetary policy loose long enough to let the labor market regain its pre-pandemic health. Before Covid-19, employment gains squeezed the jobless rate to its lowest in half a century, finally benefiting usually left-out minorities.

Powell said the real-world unemployment rate might be around 10% rather than the official 6.3% in January, calling for a nationwide effort to get people working. After all, the long economic recovery and tightening labor market through February last year produced no inflation sustained enough to trouble the Fed’s 2% target.

Former Treasury Secretary Larry Summers recently suggested President Joe Biden’s $1.9 trillion stimulus plan could overheat the economy and cause runaway price increases. Powell, though, blessed continued policy support for workers, households and small businesses. As far as inflation goes, his position is consistent with experience over the decade since Summers was last in government. (By Richard Beales)


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