Federal Reserve Chairman Sees No Issues With The Massive Expansion Of Its Balance Sheet
Federal Reserve Chairman Sees No Issues With The Massive Expansion Of Its Balance Sheet
June 17, 2020
Federal Reserve Chairman Sees No Issues With The Massive Expansion Of Its Balance Sheet
Federal Reserve Chairman Sees No Issues With The Massive Expansion Of Its Balance Sheet
June 17, 2020

Jerome Powell, the Chairman of the Federal Reserve, has seen no issues with the massive expansion of the Fed’s balance sheet and believes that inflation will struggle to stay above the target.

On June 16, it has been reported that during the initial report on the state of the economy and the actions taken by the Fed in response to the COVID-19 crisis, Powell listed all of the extraordinary measures adopted by the bank since March.

However, part of that included an unprecedented expansion of the Fed’s balance sheet, which purchased securities on the market with newly created money as part of the practice of Quantitative Easing.

It has been analyzed that he was entirely optimistic about the prospects of inflation, as he noted that in the short term, weak demand resulted in declines in prices of apparel, gasoline, air travel, and other industries impacted by lockdowns.

ALSO READ :  Central Bank Branch Of Iran Set On Fire, Crypto Community Closely Follows The Developments

He said:

“Due to this, consumer price inflation has dropped noticeably in recent months.”

He added:

“Longer-term inflation expectations have remained fairly steady. As output stabilizes, and the recovery moves ahead, inflation should stabilize and gradually move back up over time. […] Inflation is nevertheless likely to remain below our objective for some time.”

Likewise, by answering concerns from Senator Richard Shelby (R-AL) on the size of the balance sheet, Powell dismissed any resultant issue.

He said:

“I don’t think that the balance sheet at anything like its current size presents any real threat to either inflation or financial stability.”

Also, he stressed that the balance sheet is only expanded just as much as it is necessary, without making it “any bigger than it needs to be.”

But he revealed that it is unlikely that the Fed’s balance sheet will be de-leveraged following the crisis by saying:

“When the time comes, [like] what we did from 2014 to 2017, we just froze the size of the balance sheet, and as the economy grows, the balance sheet shrinks as a percentage of the economy.”

Moreover, he explained that in the past, actively shrinking the balance sheet had effects on the economy, while a “passive” approach did not. 

ALSO READ :  People’s Bank of China Completes The Top Layer Design And Joint Testing Of Soon-To-Be-Released CBDC

Powell’s optimistic view contrasts with the opinion of many market experts, who believe the dollar may lose a significant portion of its value to inflation.

Thus, the remainder of the session largely focused on the perspective of employment after the crisis, as well as the recent decision to purchase corporate bonds, which some senators criticized as being unnecessary.

Source: Cointelegraph | Image: New York Post


Crypto News Point a news platform of Digital Notice Media Labs is primarily a regular publication of information, commentary and articles focused extensively on fintech, blockchain technology, cryptocurrency, blockchain-based tokens, cryptocurrency market trends, and trading strategies. We do not provide individually tailored investment advice and does not take a subscriber’s or anyone’s circumstances into consideration when discussing investments, nor is Crypto News Point registered as an investment adviser or broker-dealer in any jurisdiction. Information contained herein is not an offer or solicitation to buy, hold, or sell any digital assets.

Affiliate Disclosure: To help support the work we do here at CNP, we often link to products and deals from around the web. Should you buy some of these, we may get a portion of the sale.

We in generally gather content from the major websites. In every article there is always a clear link and attribution to the source publication. If you have any issue with any of our published content taken from your site, kindly let us know so that we can take appropriate action. In any case, the content of the pages of this website is for your general information and use only. It is subject to change without notice.

You May Also like

Ishita Bora

Ishita Bora is a Senior Content Creator at Digital Notice Media Labs with an experience of 1 year. She has completed her Master's Degree in Language and Linguistics in 2019 from Gauhati University, India. Her interest lies in blockchain technology and cryptocurrency space, as she loves writing about blockchain and other blockchain-related articles. Currently, she is working on blockchain-based news, reviews, featured articles, and guides.