Powell Speaks At IMF Meeting
Amidst rising optimism over the pace of the US vaccination programme and the prospect of an acceleration in the economic recovery as the country re-opens, Fed’s Powell had some words of warning this week. Speaking as part of the ongoing IMF meeting yesterday, the chairman of the Federal Reserve cautioned against this optimism, much in the same way that we have recently heard him pushing back against rising inflation expectations.
Powell Warns Of Unequal Recovery
Powell specifically noted that while there has been progress made recently in the US, there are weak spots. On this matter, Powell told the IMF: “The recovery, though here, remains uneven and incomplete. The burden is still falling on lower-income workers and the unemployment rate in the bottom quartile is still 20 percent.”
US Jobs Still Down from Pre-Pandemic Levels
Powell’s comments come on the back of the latest jobs report which showed a further 916k jobs were created in March, a firm rise from the almost 500k jobs created in February. Kristalina Georgieva, IMF MD, also spoke at the event and was keen to stress that more than 8 million US workers remain out of work of the 25 million who lost their jobs at the height of the crisis. The vast majority of them are within the services industry and a large percentage of low-paid workers comprising women and ethnic minorities. Georgieva celebrated the response by the central bank but added that the crisis was not yet over warning that “premature withdrawal of support can cut the recovery short”.
IMF Upgrades US Growth Forecasts As Biden Pitches Huge Infrastructure Plan
Earlier this week, the IMF upgraded its global growth forecasts and raised the US growth forecast to 6.4%. This was a sharp increase from the 5.5% forecast given in January and is well above the 5.1% averaged given for advanced economies. Indeed, these forecasts could well be revised higher once again if the infrastructure plan pitched by president Biden this week, is approved. Biden urged republicans to back his $2.2 trillion infrastructure plan, aimed at accelerating the recovery as the country re-opens. However, with a 7% corporate tax hike intended to fund the spending, it seems difficult to think republicans will back Biden on this one.
Following the breakdown through the rising channel from February lows, DXY is currently finding support at a test of the 92.07 level While this level holds, there is still scope for the upside recovery to continue towards the next bull objective of 93.91. However, a break back beneath this level will open the way for a test of the 90.98 level next.
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