Federal Reserve Chairman Jerome Powell is due to deliver his twice-a-year assessment of the American economy to the U.S. Congress this week.
This semi-annual exercise will the first for the new Congress and new president and comes as the COVID-19 pandemic stretches into its second year.
The message Powell is expected to deliver is not new.
The virus is causing “economic hardship.” The direction of the economy “will depend significantly” on how effectively we address the pandemic. Even a full year into it, the disease still “continues to weigh on economic activity, employment and inflation.”
These were the messages from the Federal Reserve’s interest rate-setting committee one month ago, and nothing has measurably changed to alter the Fed’s support of the economy.
Beyond Powell’s economic assessment, he likely will be asked to opine on the GameStop Internet-chat-room-fueled trading phenomenon. His testimony on Tuesday is before the Senate Banking Committee and on Wednesday is before the House Financial Services Committee, the same committees that have or will hold hearings on the GameStop trading story. Members may try to draw the central bank into drama.
Powell and the Fed are interested in the stability of the financial system, not the buying and selling of any particular stock. For better or worse, the chairman of the Federal Reserve has evolved into a top diplomat of American capitalism. As such, if asked about the stock trading, Powell likely will sidestep while voicing confidence in the stability of the financial infrastructure of the U.S. economy.
After all, despite the noise generated by the GameStop story, the major stock indices are near new highs. Yet only half of American households own any stocks, and only about one in seven directly own shares.
The mission of the central bank makes no mention of stock trading. Its dual mandates are full employment and stable prices.
So, at a time when the average unemployed American has gone six months without working, Powell’s messages about the economic conditions in which Congress is considering fiscal policies is where Congress and investors should focus.
Financial journalist Tom Hudson hosts “The Sunshine Economy” on WLRN-FM in Miami, where he is the vice president of news. He is the former co-anchor and managing editor of “Nightly Business Report” on public television. Follow him on Twitter @HudsonsView.