tv Federal Reserve Chair Powell Discusses World Economic Policy CSPAN April 9, 2021 4:59am-5:54am EDT
and it is on the basis of three things. one, vaccinations advancing, two, major economies putting in more stimulus, and the united states recently did that, and three, lockdowns do not cause the same decrease in economic activity, but there are two things to watch. one, the virus is mutating and still roaming around the world. therefore, we have to concentrate on vaccinations everywhere for everyone, a fair shot. two, we see dangerous divergence with a small group of economies moving to pre-covid levels and the rest of the world being
behind. low income countries, vulnerable countries, tourism dependent, small islands -- they are all diverging, and that has been a big focus of our meetings. what can we do? my main point here is i am extremely grateful to the membership of the imf for committing to provide a big boost to reserves globally. $668 billion special drawing rights allocation. it will help these countries that are falling behind. >> we will get to that, and i know there is news on that today, and am of the other policies, fiscal, monetary, and otherwise that can get us there, but the managing director mentioned vaccines first in terms of the outlook for recovery. there is optimism, but the speed and strength of the recovery is
a bit of a wild card. can you tell us where you are on vaccination and why it has been so much slower than expected? >> we look at the vaccination outlook. in february, for example, we made use of 28 million different vaccines within the european union. by the time we get to april, we expect that to be 100 million vaccines. the goal the european union has of vaccinating 70% of our population by the -- adult population by the summer, and we will get there. it is fair to say that at the start of the vaccination process , we were centralizing something new, which was masked vaccination and allowing that and asking for that to be led by the european union commission. we did have a number of difficulties we needed to work our way through, but we are working through them, and when we get, for example, to summer,
we will be delivering the targets that we set, and that will create the foundation, for example, when we move into next year, you will see the european union being able to supply billions of vaccines through the different manufacturing sites we have across the european union, so we are making good progress, and i think that is a reason for optimism regarding the ability of europe to make progress in the face of the challenges described by the managing director a moment ago. >> even bigger vaccine challenges around the world, you have been focused on the issue of vaccine and equity. how long do you think it will take to get some sort of global herd immunity where at least we can get a majority of people in countries around the world access to the >> thank you sarah. if we continue with the inequality in vaccine access that we have now, it will take a
long time. you have to look at the numbers. other vaccines that have been distributed so far. 0.1% have gone to low income countries. 86% too high and upper middle income countries. if we do not do something to change the pace at which countries are getting access to vaccines, it will take a long time. this is in the self-interest of everyone. we know -- as the managing director said -- that mutations are coming up. if we do not act fast, the rest of the world can see there gains reversed. we need to up volumes of production of vaccines.
we need to allow better manufacturing access to developing countries. distributing, manufacturing capacity, wider than we have now. >> chair powell, the u.s. is going fast. it is the driver of optimism in the global economy right now things to three pharmaceutical companies and fiscal stimulus. and you and your team at the federal reserve. we got a great job reports, a services number. no stronger rebound are we looking at for this year? >> thank you, sarah. there are a number of factors supporting a buyer outlook for the u.s. economy which looks like a faster recovery. i would point to substantial fiscal support. vaccination now moving quickly and on track to allow a full reopening of the economy fairly soon. we vaccinated at least over 100 million americans, have had at least one vaccine. over 60 million are fully vaccinated. we're doing 3 million a day.
monetary policy is still supportive. we got a taste at what fats progress would look like with the report, close to one million jobs, particularly if you had in the revisions for january and february. we want to see a string of months like that so we can show progress towards our goals. the recovery remains uneven and incomplete. the burden is falling on lower income workers. the unemployment rate in the bottom quartile is still 20%. there are still 8.5 million people out of work. this unevenness is a very serious issue. viruses are no respecter's of borders. until the world is vaccinated, we will all be at risk of new mutations. we will not be able to resume activity with confidence all around the world. it is not only the right thing to do, is the smart thing to do, as the director general just said. >> when you think about the progress you would like to see,
you mentioned the number of economic indicators. to pay attention to what is happening with the globe? in this terms of speed of vaccinations, the speed of recoveries? they not doing as much in the fiscal front as we are in the u.s. does that matter for how fast you will start your exit strategy? >> what we have said about our asset purchases is that they would continue at the current pace until we see substantial further progress towards our goals. that will mean actual progress, we are not looking up forecasts for this purpose. we are looking at actual progress. that is inflation, it is also indicators of maximum employment. i would look at global vaccination as a risk, something to weigh in on the progress we're making. something that we tracked track very carefully, course. there is a risk here in the u.s.
cases are moving back up. i would urge people get vaccinated and continue social distancing. we do not want another outbreak, even if it has less economic damages and kills fewer people, it will slow down the recovery. >> managing director, how long since -- central bankers stay in emergency support mode. >> in this crisis, they acted swiftly, decisively, and on a large scale. globally we had $16 trillion of fiscal measures. the equivalent of $10 trillion in what central bang's have done . this is helped. -- central banks have done. this has helped.
premature withdrawal of support can cut the recovery short and that would mean all the benefits we have built could potentially be lost. i want to make to pleas. recognize that this year, next year vaccine policy is economic policy. it is even a higher priority than traditional fiscal and monetary policy. why? because without it we cannot turn the fate of the world economy around. as chair powell said, between now and 2025, we will add nine
chewing dollars -- $9 trillion to global output if everyone is vaccinated faster. the interesting piece of this is 60% of this has to be developing an emergency economies. this would translate into $1 trillion additional tax revenues. i cannot think of a better value for money this and next year then investing in accelerated vaccinations. only then, chair powell can think seriously about exit strategy, which, by the way, strong growth in the u.s. has positive spillover.
and a change could be tough on financial -- on countries falling behind. what is the key to it? put an end durably to the health crisis. >> we're talking about the three pillars of fighting the pandemic and the economic pain out there. minister, we talk to you about vaccines in europe. the ecb has been innovative when it comes to its policy and pledged full support. fiscal policy. there has been some stimulus there. not as much as the u.s., which i know you hate that comparison. could you do more, and why have you not gone bigger? >> thanks, sara. it's always valuable to make comparisons between different parts of the world.
we can learn from each other and calibrate our efforts and look whether we are doing enough. if you look at the figures for last year, they indicate the u.s. was involved in discretionary fiscal stimulus measures worth around 10% of its national income. the euro area at the same point was involved in measures around 8% of our national income. so there was a difference, but in addition to that, we have social insurance systems in the eu that would provide payments to many of our citizens automatically. that plating medium -- that played a role in importing the cert -- european economy in 2020. there are many things happening in europe at the moment that will be at the heart of the recovery.
we have the recovery and resilience fun. the fund is a very large expenditure and grant program. commonly funded by the eu. the kind of initiative which before the pandemic would have been unthinkable. that will be happening later on this year. member states have their own budgetary decisions. that combined with a vaccination program which is accelerating means that as we move through this year, you will see europe move ahead and our recovery will gather pace. we have to be conscious, which we are of the global responsibility touched on by the other speakers and how we will continue this -- with this repot -- with this response building. >> trade contracted 5% last year. sharp drop. what do you expect this year?
how strong the -- how strong does it bounce back? >> thank you, sara. it contracted by 5% last year. actually, less than we thought. it is been -- trade has been quite resilient. even though we have issues with export restrictions, you can see during the pandemic supply chains are resilient. we had traded medical supplies and equipment up by 16% and supplies of ppe up by 50%. trade has continued -- has contributed. it could do more. trade will be up by 8% this year, our forecasts show.
but there is a considerable divergence. we see imports and exports in north america and asia rebounding quite quickly and faster than africa and the middle east. the divergence we see in recoveries is reflected in trade. this is partly due to the fact that whereas the rich countries have been able to issue more fiscal stimulus -- for example, according to the speaker, it is about 21% of gdp fiscal stimulus and richer countries compared to 6% in emerging markets and 3% in low income market -- low income countries. that has something to do with the weakness in some of these regions. trade we hope can contribute more. first to making vaccines more available, by lowering export
restrictions, working with manufacturers to up volumes and getting more of the vaccines around the world. and second, i think a strong multilateral trading system that contributes to the international recovery much more than one would have expected. >> chair powell, divergence is the word of the panel so far. even in the u.s., which is growing strongly and quicker than the rest of the world, there are some divergences. it is not equal, by race and gender and sector. you've been focused on this. i hear you talk about it at news conferences. which parts were you the most? can you do anything about it? >> what was so unusual about this event, this pandemic, was it hit companies that were in the service industries that faced the public with a lot of public interaction. the people who lost their jobs
to the biggest extent were relatively low paid service workers and travel leisure hotels, restaurants, things like that. that tends to skew towards minorities and women. they tend to be lower paid and have left desk lessen the way -- have lessen the way of wealth to fall back on. they were -- they very large portion of the burden. the unemployment rate of the bottom quartile of earners is still 20%. the higher end of the labor market has virtually recovered. but not for people in the bottom 20%. we have been concerned about this from the beginning. it amounts to nine or 10 million people, depending on how you count it, who were working in february of 2020 who are now unemployed. they were in the workforce. they want to work. but they are not working. we will not forget them. we will provide the economy the support it needs until the job is done. the real concern is the longer-term unemployment can
allow people skills to atrophy, their connections to the labor market to joint all. they have a hard time getting to work. it is important to remember we are not going back to the same economy. this will be a different economy. one of the things we hear from companies is that they have spent a lot of time since the pandemic arrived looking at ways of more effective technology and fewer people. you will see some of that in these public facing jobs. there will be millions of people who will have a hard time recovering. it would be appropriate for us to continue to support those people. what we call labor markets trying, people are out of work for a long time, the ret -- the record shows their whole economic lives and broader lives as human beings can be damaged permanently. we want to avoid that. i would say we have avoided a great deal of it. the really bad outcomes we were concerned about a year ago have
not materialized. nonetheless, nine or 10 million people out of work and we need to keep supporting them and the economy and we will. >> managing director, did you want to say something about the scarring but also the unequal nature of the recovery we are seeing? >> is very clear that within countries and across countries, the impact of the pandemic is very different. within countries, low skilled workers, and unfortunately young people. they enter the labor market at a time the economy is in recession. as chair powell says, some sectors are being depressed now and will find it hard to come up. then comes the second scarring that is related to small and
medium-size enterprises. these would be the largest companies. what we are thinking now, that there is a high probability that we would see companies that have been on life support falling off the cliff. meaning that one in 10 jobs may disappear. the question is, what should policymakers do? first, it is critical when we withdraw support to, at the same time, lifted up to help people rescale and re-profile. move from shrinking sectors to those expanding. i want to give two examples of
expanding activities. more attention to the climate crisis. and more investments going into the new climate economy. there opportunities for job creation. take for example energy -- seven jobs versus one in the traditional energy sector. that requires training and support. reforestation. resilience to climate shocks. these are all labor-intensive activities. we need to think about it now so we are able to support a transition of people. the second issue, of course, is how we make sure that is sufficient. attention paid to a vibrant
small or medium-size enterprise sector, that is more about having access to finance and how that will take place. we are going to have a different economy. it does not mean a worse economy. if we planned well in advance. everything about educational attainment. if we think about flexibility for people entering the labor market. and everything about where growth is going to come from. in the u.s. there is now a lot of discussion about infrastructure including green infrastructure. we have to have not only support through the crisis, but also
injection of a momentum. >> are you going on the record supporting president biden's new infrastructure plan? the american jobs plan? >> for plight sometime -- quite some time we have been in favor of more investment in infrastructure. it boosts productivity here in the u.s.. we think that adding to this, green and social services, social infrastructure, it's positive. we've not seen what the impact may be on growth projections yet, but broadly speaking, we support it. >> minister, how are you tackling these issues with your
recovery fund, of course, a huge component of which is green and for structure? how are you thinking of preserving the economy? the workers left behind? >> thank you, sara. the first step zero's to realize the scale of the challenge. if i look at it from a european perspective, across the. of the pandemic so far, we have seen unemployment levels within the io go up on average -- within the eu go up on average by 5%. if you are young, the unemployment rate for young people has gone up by 6%. if you're a woman, the unemployment rate for young women has gone up by 9%. illustrates just how powerful the varied impact of the pandemic is at the moment. in terms of how we respond back to something that is amplifying
a deepening inequality, we have the responsibility to protect income, particularly the income of the most vulnerable at a time in which the pandemic is having such an effect on our society. across europe and within america, a huge focus has been placed on how we can do that. secondly, a point made by the managing director -- we need to recognize when we are looking to prioritize a green transition and a digital transition, as being the recipients of huge additional investments, we have to be aware that the movements within our labor markets to respond back to that investment might not be automatic. moving someone from a contract intensive part of our economy -- into parts that could be renewable, climate transition, will continue to require a
really active take from governments in a policy point of view. the focus on trading and how we ensure we do not confuse and -- a rebound with all the recovery and the need to support positive change within our economy. all the individuals impacted by this, i think it is a challenge that we can respond positively to. >> i want to move this conversation to another hot button topic when it comes to the global outlook, which is inflation. director general, i am eager to hear from you on this, because chair powell gets asked about this a lot lately. what we are going to see is transitory. a lot of what is happening is the result of what we are seeing and supply chains. the suez canal, global chip shortages. things you are monitoring. can you bring us up-to-date on
the impact this will have on prices globally? >> thank you very much, sara. i just want to touch on the suez canal incident and what happens to supply chains. as to production around the world. -- and to production around the world. it shows you how important supply chains are. when we had the ever given stuck in the suez canal i couple of days, it held up supply chains around the world. it slows production. it is very important -- what we are seeing is, as they develop, the richer countries performing better, their economies are doing much better. we see a lot of shipping going,
of goods, going in that direction. in terms of shipping containers, there is an indication of how supply containers of goods going to developed countries -- goods not coming from developed countries, a shortage of goods moving around, is part of the difficulty we are going to see as we move forward looking at the supply chains globally. how the ships move. how containers move. this will impact what happens to inflation. eventually, in different parts of the world. hopefully, as we project that trade is going to rebound this year, we hope this kind of
movement will make sure supply chains perform the function in terms of supplies around the world for production. >> chair powell, you have said inflation coming isn't -- is it transitory. even the ecb president le guard referred to it as transitory. what does transitory mean? how high would be too high deco -- too high? >> let me be very clear by what we mean by transitory. there's a difference between a one-time increase in prices and persistent inflation. when we say inflation, that's what we mean. persistent inflation that goes up by 2% or whatever it is year after year after year. that level of inflation tends to be dictated by underlying inflation dynamics in the
economy, as opposed to things like bottlenecks. the nature of a bottleneck is that it will be resolved. that the supply side will adapt. that, therefore, whatever costs people have to bear in prices because supplies are temporarily type -- tight as the economy reopens will be repeated next year. we think supply chains will adapt and become more efficient. it might take a year. but it will happen. that is what we are seeing. remember, sarah, we have had 25 years of inflation dynamics, roughly 25 years where inflation has been low. in many advanced economies around the world they have been unable to reach 2% inflation. some are fighting off disinflation. does bended dominant set -- that is been the dominant set of inflation for the past two decades. now we have situations with
economies reopening, a surgeon demand perhaps, bottlenecks, perhaps. it seems unlikely that will change the unlock -- the underlying psychology that has taken deep roots over the course of many years. we think there will be upward pressure on prices, which could be passed to consumers in the form of price increases. we think that will be temporary. there is no certainty in this. if inflation's expectations go up, we would react. one of our two mandates is price stability. the other is maximum employment. we will use the tools to deal with the outcome to guide inflation back to 2%. if the need arises. in the most likely case, this.
will show temporarily higher prices, but not persistent inflation. >> you would raise interest rates? >> that's the principle tool we have with inflation, yes. the traditional tool is to restrain the economy and reduce inflation that way. again, we do not think that is the most likely outcome. that is the playbook, though, if inflation, counter to our expectations, moves meaningfully above levels where we were comfortable. these days people think inflation is largely a function of what the public expects it to be. we would monitor inflation -- inflation expectations very carefully. if we see them moving, we would react to that. >> managing director, what will happen to the global economy when chair powell is ready to lift off, when he is -- which he
is not, and talk about tapering. clearly the rest of the world is watching and feeling it. >> let me first say that, to the extent we also research what may be happening to the u.s., we subscribe to what chairman powell says. our expectations are for 2.5% inflation in the u.s. next year. it is correct to connect what may be done in the u.s. to counter more abundance expectations for inflation, exuberance is the right word. then impacts on interest rates. businesses that are highly leveraged and seeing interest
rates jump as a result -- this is why we have to be careful and communicate clearly. it is helpful to have the expectations and for the rest of the world to be as clear with monetary policy as the u.s.. let me take two points on a placement -- met let me make two points on inflation. we are more concerned about inflation in emerging markets, countries where monetary financing has been taking place because of the limited fiscal space and the need to support their economies. this is why it is so important for international institutions, financial institutions like the
imf to be therefore these countries so they do not need to fall back on monetary financing. some of them for the first time are using quantitative easing. as chair powell the right now, this is a delicate instrument to apply. for that reason, we are watching carefully what may be happening in emerging markets. the second point on inflation is we need to remember how important trade is to halting inflation. it allows goods and services produced at least cost to travel around the world holding prices down. i would argue strongly that we all need to support to reform
the trade system so it delivers what it can successfully be delivering. a world where we can all enjoy standards of living because of getting the benefit of the labor. >> that's a perfect segue. i was going to ask you next. we still have terrace between the u.s. and china. there is still a big? between the two largest economies. what will happen with that under your leadership? and generally? how will you open trade more daca it feels like a rough. , here, during the previous administration. >> we all know an open and transparent and fair multilateral trade system is what feels best for the whole world.
that is why it is important to support and strengthen the wto. strengthening the w seo can help bolster china and the u.s. -- the wto can help china and the u.s. solve some of the problems between them. the eu and u.s. problems with steel and boeing and airbus, maybe we can come to some negotiated solutions that would be outside of the purview. solving these problems will be materially important. for trade all around the world. when the big powers have this kind of impact on what happens in other countries, and what happens on trade.
we need to strengthen the wto and strengthen the multilateral mechanisms and trading systems so countries can once more have a resource to settle any disputes and build a consensus around certain trade rules that are going to be very strong for the world. that is going to -- that is what we are trying to do at the wto. as a rulemaking organization, we are the one place where members can come to settle their disputes. that is one area where we really need strong reform. we need the support of all the members, the u.s., china and the eu. developing countries, as well. to make this work.
i think the debbie co also needs to -- the w geo needs to reform its rules for 21st century issues. chairman powell talked about a digital economy. this is one area where the world is moving very fast. this will drive trade. for the foreseeable future. and yet, we do not have the roles -- the rules for this. strengthening roles -- rules for small enterprises and women in trade, women have been particularly hit by the pandemic. these are areas the debbie co needs reforming -- the wto needs reforming. we need to lower carbon emissions in the world. we need to build rules that will help strengthen the system. a lot of work to be done.
a lot of challenges in order to make the place a viable one. where big countries and small countries can settle their differences and agree on new roles. -- new rules. it's going to be tough but we will get it done. >> thanks for sharing. in the few minutes left, we have been talking about all these issues that could affect trade. i really want to get your take on politics in europe. chancellor merkel is retiring this year after 16 years. germany faces an election in september which is, of course, paramount for europe. emmanuel macron faces reelection early next year. what will happen? >> i am very optimistic about the future -- the ability of europe to continue to respond to the challenges of covid-19. but also pursue the many opportunities on behalf of our
social services in making a conservation to a better world. we have some important elections coming up, first in germany and then in france. but look elections that have just taken place. in holland, the change in italian politics, in both cases we have seen governments either about to be formed under prime minister draghi that is very committed to the european project and very committed to strengthening it. and also what we have seen is the institutions of the european union, like the commission, take a valuable role in putting together the kind of economic initiatives helping europe two things which even a year ago we would not be able to do. the kind of political responses that give me that optimism would be, for example, we have a program here in europe called
the shore program. that program pays the wages for between 25 and 30 million of european citizens during the time of the pandemic. that shows the political strength that is there behind our response to this pandemic and so many other things. i am hopeful as the elections approach and take place we see this dynamic be in place, if not strengthened in the years to come. >> chair powell, since we are onto 2022, your term is up february 2022. are you going to be the one to execute this massive challenge of an exit policy? we are a little surprised to hear you have not had any calls that with president biden. i do not know if that is normal or not. hard to define after your engagement with the last president. >> i have another massive challenge that i am focused on. doing my job every day as best i can to serve all of the american
people, all the people i am fortunate to serve. i do not spend time thing about that. i spent time thing about how we can do the best job we can. that's enough to think about. >> good answer. in the moment we have left, i want everyone's thoughts on the biggest risks to this outlook. we talked about a lot of the issues and how you feel about them. to use a cliche news, what keeps you up at night, managing director, and it comes to the path forward over the next year or two? >> clearly, the virus is the big unknown still. what keeps me up is missing on the opportunities for transformation towards green, smart, inclusive societies. more specifically, how we will
deal with the threat of inequality. from history we know that when a pandemic hits, inequality goes up and stays up for some time. we saw this with h1n1 and zika. can we do it differently? can we strengthen the support for people in education, health, social safety nets? so people are resilient before the next shock. can we support the resilience of our planet? can we do the right thing for future generations? can we build the strength of our economies? let me remind us that after the 2009 crisis, we made the banking system more resilience. there is no financial crisis now to a great degree because of that. can we have the same
determination in a world that is going to be more shocked run -- >> definitely as the years come, pandemics have shown to be in our past amplifying risks and inequality. the duty we have to always serve to avoid that happening again, to get to a better place. i know i will wake up tomorrow and will wonder how many people will receive injection of the vaccine so that day by day we put the foundation they need and the second is the ingest -- the injection we need to have
available to lady the economic foundation for overcoming the disease. it is that matter every day with a particular focus on our youngest who are paying a heavy price and for many of the public health measures we have put in place. i want to reiterate what the managing director has said. we have to be aware of the positive things we can achieve, for example, how much we have achieved collectively over the last year in dealing with this pandemic and how much more we can still achieve. >> these are like closing statements in a debate. director general, what about you? what you see is the biggest risk factors to the positive outlooks you've laid out for trade? >> i have two things that keep me awake at night. one is very trade related.
the other has to do with low income countries. i think -- let me start with that. the fact that the biggest risk to these countries is not getting access to the vaccine, like i said, at the beginning. and that continuation of divergence of these economies from the rebound of the better off economies. that is a very difficult thing to contemplate. i hope that there is hope. we have heard about the 650 billion sdr's. the fund is working very hard to make sure this is issued and real located -- reallocated to the most vulnerable countries that need it. we also have the debt version -- burning.
-- burton. it is not allowed them to other physical security of other countries both in emerging markets and rich countries. i want a very strong word of praise for low income countries, particularly on my continent. they took strong measures. severe lockdowns. you have a lot of people employed in the informal sector who are now told they have the ability for their daily living. but they still did the right thing. my hope is the world will realize we need international cooperation to come out of this crisis we are in. that we will not let this nightmare happen where half the world is left behind. that we will direct resources to the most vulnerable countries where they are needed, to small
and medium enterprises in these countries. so we can begin to converge in the same direction. that is one thing. the second set, the second nightmare i have has more directly to do with trade. that is missing the opportunity for the debbie tio -- for the wto members to come together and agree on the roles -- rules on those innovations and economies that are happening right now. the digital economy. we cannot get away from it. my expectation to avoid these nightmares is that the debbie tio will be able to make -- the wto will be able to make these regulations and rules for the green economy and for inclusion. as i said before, small
enterprises, how will we get the rules that make sure these participate? that they are included in regional and global supply chains? so trade plays the part it needs to play in the rebound. >> chair powell, nightmares. what keeps you up. >> i would first mention the nine or 10 million -- i think of those people who are trying hard to get to the lives they had to get back to work. you may know this. there is a substantial tent city i drive home on the way from work on virginia avenue. we need to keep reminding ourselves that some parts of the economy are doing great but there is a very large people that we need to finish the job for and get back to a great economy. the last thing i will mention is, i think generally we focus too much on the short-term and on palliative measures and not
on longer-term supply-side measures. in other words, i think we need to as a country -- and i'm not talking about any particular bill -- invest in things that will increase the inclusiveness of the economy and longer-term potential of it. to invest in people so they can take part and contribute to and benefit from the prosperity of our country. >> final question. can we do this in person next year? >> i very much hope the answer is yes. >> put it on your calendar. >> ok, earning it down. we will be here, all of us together. >> best way to end it. thank you all so much for such a lively and topical conversation. really appreciate it. thank yo>> hi, everyone.