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The US Senate was poised Thursday to confirm Jerome Powell to a second term as head of the Federal Reserve, as the central bank works to crush soaring inflation. Online News
The vote will come as inflation has hit a 40-year high, fueled by the conflict in Ukraine and ensuing sanctions imposed on Russia, as well as Covid-19 restrictions in China that have raised concerns the global supply snarls may worsen.
Powell, a Republican who enjoys broad bipartisan support, has continued at the helm of the central bank although his first term officially expired February 4.
His confirmation was delayed by a drawn-out process to approve Lisa Cook to join the Fed board — the first Black woman to serve in the post — who was finally confirmed on Tuesday with only Democratic votes.
The vote on Powell comes the day after the upper house of Congress approved the nomination of Philip Jefferson of Davidson College, marking the first time the Fed board has had more than one Black governor.
US President Joe Biden, whose popularity has taken a hit from the soaring inflation and record gasoline prices, has said repeatedly that tackling the issue is primarily a job for the Fed.
“I put forward highly qualified nominees to lead that institution, and I strongly urge the Senate to confirm them without delay,” he said Tuesday.
Powell led the central bank as is slashed the benchmark interest rate to zero at the start of the pandemic in March 2020 and pumped money into the financial system to prevent a severe downturn in the world’s largest economy, and is now overseeing efforts to cool price pressures impacting American families.
The Fed last week announced its largest rate hike since 2000 and signaled similar increases were likely in the coming months.
The challenge for Powell and the Fed is to turn down the heat on inflation without tipping the United States into recession, but he has expressed confidence that the economy is strong enough to withstand the tighter monetary policy.
With the latest additions, the Fed board will be just one short of its full complement of seven governors.
Cook and Jefferson each have researched inequality in the labor market.
Powell has repeatedly stressed the importance of ensuring economic opportunities extend to disadvantaged groups — a notable change of focus in an economy where Black workers face far higher unemployment rates than other racial groups.
Cook, a professor of economics and international relations at Michigan State University, has focused her research on how discrimination has harmed the American economy and the damage downturns do to the poor.
Jefferson, also an economics professor, is only the fourth Black man to serve as a Fed governor.
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During the past few years, a number of the world’s central banks have engaged in massive programs of monetary expansion, even as jobs and businesses were lost by way of virus-related restrictions and quarantines.
For example, beginning in March of 2020, the US Federal Reserve engaged in a substantially greater program of monetary expansion by purchasing hundreds of billions of dollars of Treasury and corporate bonds.
Since the early part of March 2020 to date, the Federal Reserve has added over $4 trillion to its holdings.
In particular, whereas on or about February 24, 2020, the holdings of the Federal Reserve stood at $4.2 trillion, on or about January 17, 2022, the holdings of the Federal Reserve stood at about $8.9 trillion.
As well, the Federal Reserve has kept interest rates low.
Recently, Jerome Powell, the head of the Federal Reserve, said that he wasn’t concerned about inflation and that, for the none, the Federal Reserve would keep interest rates at low levels.
Another examples is that of the Bank of Japan.
According to Fred Economic Data, as of October 2021, the Bank of Japan’s holdings were about $6.4 trillion or about 725 trillion Yen.
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In the early part of March 2020, the Bank of Japan’s holdings were $5.3 holdings. During the period mentioned, the Bank of Japan added over one trillion dollars to its holdings.
A number of corporations have been borrowing money inexpensively and have been purchasing their own shares of stocks, increasing share prices of stocks.
Still, there are concerns among investors.
A number of them have expressed concerns about central banks’ eventually increasing interest rates, as, during the past year, inflation levels have been increasing.
The combination of low interest rates, expansive monetary policies, fiscal stimulus programs, which themselves have infused trillions into the US economy, and shortages of goods and services caused by virus-related restrictions and lockdowns has increased levels of inflation.
Investors also worry, for example, about announcements recently made by Toyota and VW; those companies have announced that because of shortages of particular types of material, they will be reducing levels of production.
Some weeks ago, the results of a survey of UK manufacturers were released.
That survey indicated that many businesses in the UK are concerned about shortages of supplies and will be making necessary adjustments.
In general, jobs and businesses have been lost by way of mandates, restrictions and quarantines, which, in their turn, were imposed by way of the virus narrative.
In the US, overall, the mortality rate of the virus is about .069%, according to Statista, an award-winning service.
The recovery rate is over 99% for most age groups.
What has followed in the wake of lockdowns and mandates has been the infusion of trillions of dollars into the US economy, the increasing succeess of online businesses like Amazon and other large online retailers, various bank and tech-related stocks, the shuttering of small to medium-sized businesses and the loss of millions of jobs.
Another result has been the increasing levels of inflation, especially those of food and fuel.
In official terms, for purposes of reporting, the US Labor Department uses what is called “core inflation”.
Core inflation excludes items like food and fuel, as those are deemed too volatile.
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