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Powell: Fed wants to see 1 million job gains for 'a string of months'

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Federal Reserve Chairman Jerome Powell said Thursday that the Fed would be encouraged if the economy extends the 1 million-a-month pace of job gains seen in March.

Last week, the Bureau of Labor Statistics reported that the economy added 916,000 non-farm payrolls in March, the fastest pace of growth since August.

The surge in job gains comes alongside a national vaccine rollout, as the Centers for Disease Control and Prevention reports that 171 million Americans have received at least one dose. The central bank chief said charging ahead on vaccines is key to supporting more job creation as the re-openings continue.

“We want to see a string of months like that so we can really begin to show progress toward our goals,” Powell said at an International Monetary Fund event Thursday.

Powell’s use of the word “progress” offers a small new detail on how the central bank is thinking about its asset purchase program.

In an effort to alleviate pressures in financial markets last year, the Fed has absorbed trillions in mortgage-backed securities and U.S. Treasuries since the depths of the pandemic. The Fed is still snatching up $120 billion a month in assets, promising to continue the aggressive support until “substantial further progress” is made toward the Fed’s goals on maximum employment and price stability.

By linking “progress” to a “string of months” like the March jobs report, Powell is suggesting that the Fed will not pull back on its asset purchases unless it sees multiple months of large job creation.

“We just need to keep reminding ourselves that even though some parts of the economy are starting just great, there’s a very large group of people who are not,” Powell said.

The Fed chairman did not clarify what would constitute a “string of months.”

Concerns over inflation

The remark also reveals the central bank’s greater attention to the labor market over inflationary pressures, where Powell did not express concern over rising inflation.

The Fed chief noted Thursday that bottlenecks in global supply chains may lead to temporary price increases, but not “materially” in a way that would push the central bank to have to raise interest rates.

Minutes from the Fed’s March policy-setting meeting similarly described inflationary pressures as likely to be “transitory,” whereas the labor market were “well below levels consistent with maximum employment.”

IMF managing director Kristalina Georgieva, who appeared on the panel alongside Powell, encouraged central bankers around the world to be patient on pulling easy money policies while the global vaccination rollout attempts to suppress the virus.

“Only then, Chair Powell can think seriously about an exit strategy, which of course matters tremendously for the United States [and] matters for the rest of the world,” Georgieva said.

The Fed’s next policy-setting meeting will take place April 27 and 28.

Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.

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