About the labor market

Mr. Powell said on Wednesday that employment last month remained nearly 10 million below pre-pandemic levels (in February 2020), and that “to achieve and maintain full employment requires ask for more support policies.”

Mr. Powell also emphasized support for a combination of monetary and fiscal policy, echoing the need for the $1.9 trillion in fiscal stimulus proposed by Biden, which is being pushed forward. despite Republican objections.

His remarks were quickly used by Democrats to push for a new stimulus package. “Chairman Powell’s review reiterates the need for the robust bailout we propose.” Senate Finance Committee Chairman Ron Wyden said in a statement.

Powell's comments didn't sway the market much. Treasury yields maintained a slide boosted earlier by weaker-than-expected inflation data, while the dollar index held on to its losses. Meanwhile, the stock market recovered slightly after falling earlier.

The tone is considered “moderate”

“The Fed is in full risk management mode,” said Diane Swonk, chief economist at Grant Thornton LLP. Reality is showing that the Covid-19 virus will be "under control" rather than destroyed, and this leaves uncertainty about the speed of reopening the economy and the future of the world economy after the pandemic.”

As the risk of a multi-year pandemic subsides thanks to the rollout of a vaccine, it remains unclear whether employers will continue with a modest workforce or whether it will bounce back.

Services jobs have been particularly hard hit. And while the unemployment rate was 6.3% in January from a peak of 14.8%, the statistics don't capture the full extent of the labor market stagnation.

Mr. Powell said that if a broader measure were used, the unemployment rate could be around 10%. He also countered the idea that the economy could overheat with additional stimulus and said it could take "years" to get over the economic scars caused by long-term and even immediate unemployment. Even if the unemployment rate returns to its pre-pandemic low of 3.5%, weak inflation is still an issue.

About inflation

The Fed has not been able to achieve its 2% inflation target in a sustainable way since it was set in 2012. Frustrated by this, last year, Fed officials turned to a different strategy, accordingly, they will try to overcome this 2% level to compensate for the times when inflation is low.

Many economists believe that it will take many years to achieve an average inflation rate of 2%, which means that loose monetary policy will continue to be maintained for a long time.

The Fed has signaled that it will keep interest rates low at current levels through at least 2023, and Mr. Powell has repeated his pledge that it will not adjust the pace of bond purchases at $120 billion a month until it reaches $120 billion a month. significant progress in employment and inflation targets.

Powell's term as chairman expires in February 2022 and Biden has the power to choose someone else or nominate him for a second term.

In summary, in this message, the Fed still maintains a cautious view on the economic outlook while maintaining its monetary policy directions. The influence on the market is therefore not strong.