Fed Chairman Jerome Powell and US Treasury Secretary Janet Yellen were before the House Financial Services Committee today to discuss the response to the covid. 19 in the country. This is after on Tuesday they had a similar hearing with the Senate banking committee.
Powell once again addressed the issue of rising consumer prices, saying he expected some easing of inflation in the first half of 2022. The leader of the US central bank also noted that the current high inflation results from disruptions in supply chains.
Jerome Powell has systematically addressed this issue , having yesterday, at the closing of the ECB Forum on post-covid monetary policy, again saying that the high inflation of the pandemic era is only “transitory”. “The current increase in inflation will not lead to a new inflation regime in which it will remain high year after year,” he said.
In June and July, the consumer price index remained unchanged up to 13-year highs in the US, then slowed in August. If this period of high inflation lasts long enough to get people to rethink their spending, then the Fed will have to be more vigilant, but so far, that’s not the case, according to Powell.
Both Powell and Yellen acknowledged yesterday that inflation in the US will last “longer than expected” and today the Fed chairman reaffirmed that idea, saying that disruptions in supply chains will lead to inflation remaining high for longer than initially anticipated, but anticipating “some relief” in the first six months of next year.
In another approach, the Federal Reserve chairman has stated that the Fed does not plan to ban the use of cryptocurrencies in the US, which led bitcoin to rise 4.5%. In addition, Powell stressed that a central bank digital currency could replace some of the use of “stable coins” and cryptocurrencies, but that it would not completely replace them.
As ” stable currencies”, remember, differ from other cryptocurrencies in that they are endorsed to some type of asset with a stable value – such as the euro, the dollar or a raw material – that guarantees price stability.
However, Powell was in favor of regulating “stable currencies”, considering it to be the most “appropriate” because they are doing the same work as other assets that are regulated.
Yellen returns to the debt ceiling
Yellen is back to talking about the limit of debt, having once again warned of the possibility that the federal government could run out of money as of October 18 if Congress fails to act to raise or suspend the US debt ceiling.
A sec The treasury board was in favor of an abolition of the limit on federal indebtedness, considering the existence of this ceiling a “very destructive” threat to the “full faith and credit clause” of the United States – which describes the guarantee or unconditional commitment of a country facing the repayment of a debt.
In her testimony, Yellen argued that it makes no sense to limit the Treasury Department’s ability to pay bills that have already been approved by Congress and the President – through an arbitrary ceiling on the amount of debt that can be issued.
“If, in order to finance the decisions already taken in tax and expenditure matters, it is necessary to issue additional debt, I believe that it is very destructive (…) when we find ourselves unable to pay the bills that result from these decisions,” he declared, quoted by The Hill.
This new appeal by Yellen to abolish the debt limit occurs to about three weeks of the Treasury Department running out of sleep. and without the possibility of applying extraordinary measures to avoid a default in the repayment of the federal debt.
At the beginning of the week, Republicans blocked a bill that aimed to increase the debt ceiling, despite the fact that this same limit has been suspended three times during the term of former President Donald Trump. Republicans insist that Democrats must do it through the budget reconciliation process. Meanwhile, Democrats are pointing the finger at Republicans for refusing to support a measure that would allow the Treasury to repay debt accumulated over several decades under the baton of both parties. of debt repayment, if the indebtedness limit is not suspended or increased, Yellen recalled that many social benefits cannot be paid and that the military will not receive salaries.
Remember that the Senate Republicans on Monday blocked a proposal that had already passed the House of Representatives and aimed at financing the federal government and lifting the debt ceiling. The proposal was thus intended to avoid a “shutdown” by the federal government and a potential default on the repayment of the US debt.
This lead came after the Republicans insisted that the Democrats presented an isolated proposal on the debt limit issue, which now leaves Congress without a clear plan to keep the government afloat from tomorrow.
This day 30 of September is the date on which the current government funding expires, and the 2022 budget is supposed to go into effect tomorrow. So US lawmakers will have to try to pass a bill by the end of the day to avoid a stoppage. federal utilities from mid-October (when the available money “runs out”), and it will be necessary to suspend or increase the country’s debt limit in the coming weeks to prevent a “default”.
CNN points to the possibility that Democrats dec idirem to remove from the federal funding proposal the theme of suspension of the debt ceiling, trying instead to pass – as has happened before – the provisional project that allows the US federal agencies to continue to be financed. This legislative measure is known as the continuity resolution. While there is no final agreement for the federal budget, the “shutdown” is thus avoided through this short-term financing solution. .
The stopgap bill that the House of Representatives approved last week would allow financing and keeping the government “open” until December 3rd. In addition, the measure included a suspension of the debt ceiling until December 16, 2022.
Yellen recalled, at today’s hearing, that the debt ceiling has already been raised or suspended 78 times since 1960, almost always on a bipartisan basis.
Powell supported Yellen, saying that Congress should raise the debt threshold to avoid potentially severe impacts on the economy.
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