Jerome Powell gave an interview to “60 Minutes”, which was broadcast Sunday (April 11, 2021) night. The video of the Interview and transcript can be seen at “Fed Chair Jerome Powell tells 60 Minutes America is going back to work.”
Below are Jerome Powell’s comments I found most notable in the order they appear in the transcript. (Please note that in general I don’t necessarily agree with his comments, and in many cases disagree with them):
Scott Pelley: Is the economy still in jeopardy?
Jerome Powell: I would say this. What we’re seeing now is really an economy that seems to be at an inflection point. And that’s because of widespread vaccination and strong fiscal support, strong monetary policy support. We feel like we’re at a place where the economy’s about to start growing much more quickly and job creation coming in much more quickly. So the principal risk to our economy right now really is that the disease would spread again. It’s going to be smart if people can continue to socially distance and wear masks.
Scott Pelley: You seem to be saying, not about COVID, but about the economy, that we’re out of the woods.
Jerome Powell: Well, I’d say that we and a lot of private sector forecasters see strong growth and strong job creation starting right now. So really, the outlook has brightened substantially.
Scott Pelley: What are your projections for growth and employment?
Jerome Powell: If you look at what private sector forecasters are saying or what forecasters who sit around this table who are on the Federal Open Market Committee, our rate setting committee, what they’re forecasting is growth for this year in the range of 6% or 7%, which would be the highest level in, you know, 30 years. Or even maybe a little bit higher. And forecasting unemployment to move down substantially from 6%, where it is now, maybe to between 4% and 5%.
Scott Pelley: It seems like you’re not expecting a recovery, you’re expecting a boom.
Jerome Powell: Well, I would say that this growth that we’re expecting in the second half of this year is going to be very strong.
Scott Pelley: What do you think would’ve happened to the economy if the COVID Relief Bills had never passed?
Jerome Powell: You know, I hate to even think. It would’ve been so much worse. Congress, in effect, replaced people’s incomes. Kept them in their homes, kept them solvent, kept their lives together with what they did in the CARES Act. It was heroic.
Scott Pelley: Is what’s happening in the stock market today in your view rational or is it a speculative bubble?
Jerome Powell: We look after broader financial stability, which includes a bunch of things. How resilient is the financial system? How much capital? How much liquidity? How much risk management? Does it function in the face of significant shocks? One other piece of it though, we do look at asset prices. And I would say, you know, some asset prices are elevated by some historical metrics. Of course, there are people who think that the stock market is not over-valued, or it wouldn’t be at this level. We don’t think we have the ability to identify asset bubbles perfectly. So, we focus on, what we focus on is having a strong financial system that’s resilient to significant shocks, including if values were to go down.
Scott Pelley: The chances of a systemic breakdown like in 2008 are what today?
Jerome Powell: The chances that we would have a breakdown that looked anything like that where you had banks making terrible loans and investment decisions and needing and having low levels of liquidity and weak capital positions, and thus needing a government bailout, the chances of that are very, very low. Very low. But the world changes. The world evolves. And the risks change as well. And I would say that the risk that we keep our eyes on the most now is cyber risk. That’s really where the risk I would say is now, rather than something that looked like the global financial crisis.
Scott Pelley: Whatever happened to inflation? It seems about 1981 it took a nosedive. And now, we have an entire generation of Americans who’ve never seen rapidly increasing interest rates or prices.
Jerome Powell: That’s right. That’s one thing that’s so interesting about the economy is that it’s ever changing. The globalization of the economy and technology have enabled– manufacturing to take place all around the world. It’s very hard for people in wealthy countries to raise prices or to raise wages. It’s hard for workers to raise wages when wages can move overseas. It’s just a different economy.
Scott Pelley: At this moment in time, what’s the best guarantee that you can make to the American people?
Jerome Powell: I’m in a position to guarantee that the Fed will do everything we can to support the economy for as long as it takes to complete the recovery.
The Special Note summarizes my overall thoughts about our economic situation
SPX at 4128.80 as this post is written