Powell Hearing: Put on the hawk’s vest again, stressing that private stablecoins cannot become digital dollars

On Thursday, local time, Federal Reserve Chairman Powell went to the House of Representatives to provide testimony to the Financial Services Committee. Similar to yesterday, a series of speeches by the Fed chairman remained focused on the possible risks facing the U.S. economy next.

The first and most noteworthy is that after yesterday’s hearing, multiple media reports said that Powell did not appear the word “unconditional” in the wording of his pledge to control inflation, which may indicate that the Fed is not as hawkish as the outside world feared. Powell, who has always been closely following the media, quickly made up for it on Thursday, emphasizing “the Fed’s unconditional commitment to fighting inflation.”

Risk point +1: It is basically certain that the unemployment rate will rise

Powell’s approach to describing risks on Thursday was more grounded than yesterday’s “challenges to a soft landing for the economy.”

The Fed chairman said the current rate hikes are designed to drive economic growth down to a more sustainable pace and also give the supply side a chance to catch up. However, the Fed does not have “precision tools” on hand, so a rise in unemployment from historically low levels is a very likely scenario. However, the Fed’s purpose of raising interest rates is not to create unemployment, and the labor market with an unemployment rate of 4.1% or 4.3% is still strong.

According to the latest non-agricultural data, the U.S. unemployment rate of 3.6% in May has reached its pre-pandemic level, completely erasing the 14.7% unemployment rate in 2020. Fed officials currently expect the unemployment rate to reach 3.9% and 4.1% by the end of 2023 and 2024.

Powell Hearing: Put on the hawk’s vest again, stressing that private stablecoins cannot become digital dollars

(U.S. unemployment rate, source: tradingeconomics)

Powell stressed on Thursday that an unemployment rate of 4% is still a strong number. The fact that there are two vacancies for every unemployed American to date is a sign of an overheated labor market. So there is still the possibility that the job market will not be hit.

For the U.S. macro economy, the unemployment rate data will also be placed in a more important position. On Wednesday, Philadelphia Fed President Harker mentioned that the symbol of a hard landing for the U.S. economy should be a “significant” unemployment rate above 4% . As the first Fed official to speak publicly about recession indicators, the statement itself means that the Fed is already thinking about a recession that actually happens.

Interestingly, some congressmen also gave Powell a question on Thursday: Unemployment has risen, but inflation has not come down, what should you do?

Chairman Bao replied: The most important thing is that the Fed cannot fail to control inflation. It needs to see tangible evidence before announcing that it has successfully controlled inflation, so it may be hesitant to cut interest rates.

As for the recent high-profile TV commentator and former Treasury Secretary Summers’ argument that it would take the U.S. unemployment rate above 5% for five years to control inflation, or maintain the unemployment rate above 10% for a year, Powell refuted that if supply We won’t see anything like that, but added that it’s a “highly uncertain time” right now.

Counting the Fed Governor Bowman who expressed his position on Thursday, in the past week, several Fed officials have supported the 75 basis points of interest rate hikes in July, while maintaining the position of at least 50 basis points of subsequent interest rate hikes until inflation actually weakens. .

Talking about the digital dollar again: it must be issued by the government

During Thursday’s hearing, Powell was also asked about the Federal Reserve’s progress in researching digital stablecoin policy. In this regard, he said that the central bank’s digital stable currency is a very important financial innovation that will affect all Americans at the same time. The Fed’s plan is to advance both policy and technology research over the next few years, with recommendations to Congress at some point.

Powell also stressed on Thursday that if the United States wants to launch a digital stablecoin, it must be the U.S. government, not private companies, who provide the endorsement.

The Fed chairman said: “One of the questions about central bank digital stablecoins is, do we want private stablecoins to eventually become digital dollars? I think the answer is no.”

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/powell-hearing-put-on-the-hawks-vest-again-stressing-that-private-stablecoins-cannot-become-digital-dollars/
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