Fed Chair Jerome Powell Says Dogecoin and Gamestop Hype Highlights ‘Froth in Equity Markets’
Federal Reserve Chair, Jerome Powell, discussed a number of topics this week such as inflation and central bank digital currencies (CBDCs) following the multi-day Federal Open Market Committee (FOMC) meetings. The central bank’s lead executive was asked about feverish stocks like Gamestop shares and the crypto asset dogecoin. Powell said that the Federal Reserve aims to provide financial stability but notes there are some things in capital markets that are a bit frothy.
Fed Chair on Inflation: The committee Seeks Inflation Moderately Above 2%
This week the FOMC meetings have shown that the U.S. central bank plans to continue its monetary easing policies until it is satisfied the economic effects of the pandemic are dealt with. The FOMC meetings were also followed by press conferences where the Fed Chair Jerome Powell answered questions from a number of different news agencies. Powell discussed the benchmark interest rate and inflation, while he was also asked about digital currencies and things like Gamestop shares and the recent dogecoin (DOGE) rally.
At first, Powell was inundated with questions about inflation and one reporter stressed that some people believe “the Fed might let things get out of hand with the new policy stance.” The reporter asked the Fed Chair if the central bank will be able to get ahead of inflation before it gets well ahead of the 2% target. Powell noted that since the Fed has been able to maintain an inflation rate below 2% for “some time,” he highlighted that “the committee seeks inflation moderately above 2% for some time.”
Powell further remarked:
[The Fed is] strongly committed to achieving our objectives of maximum employment and price stability.
Despite China’s Lead Creating a Central Bank Digital Currency, Powell Says ‘USD Is Still ‘the World’s Reserve Currency’
The Fed Chair was also asked about the U.S. falling behind countries like China in the race to create a central bank digital currency (CBDC). “We feel an obligation to understand the technology and all of the policy issues very, very well,” Powell said in response to the CBDC questions.
“Central bank digital currencies are now possible, and we’re going to see some of them around the world,” Powell added. “And we need to understand whether that’s something that would be a good thing for the people that we serve. How would it work in our system? And there are some very, very difficult questions to answer, and we are engaged in a serious program to understand both the technology and the policy issues.”
The Federal Reserve’s Chair explained that the dollar is still very powerful in his eyes, and he emphasized that the USD is “the world’s reserve currency.”
“That means that the dollar is used in transactions all around the world, far more than any other currency. And that’s because of our rule of law, our democratic institutions, which are the best in the world, our economy, our industrious people, all the things that make the United States the United States,” Powell said.
Gamestop Shares and Dogecoin
One reporter noted the hype that has surrounded certain markets like dogecoin (DOGE) and Gamestop shares. The journalist said that people are searching for “yield in this market” and he wondered if the Fed felt responsible for the current financial stability in America. “Is there a financial stability concern from the Fed’s perspective at this time?” the reporter asked the Fed Chair. Powell responded and said that the financial stability the Fed provides is quite broad, and the central bank doesn’t jump on a certain issue and then move to the next.
“Financial stability for us is really, we have a broad framework. So we don’t just jump from one thing to another,” Powell replied. “I know many people just look at asset prices and they look at some of the things that are going on in the equity markets, which I think do reflect froth in the equity markets. But really, we try to stick to a framework for financial stability so we can talk about it the same way each time, and so we can be held accountable for it,” the Fed Chair added.
Just as Powell has protected the mega banks by alluding to the financial incumbents’ so-called “strength” in the past, he positioned the Wall Street banks once again as strong financiers this week.
“Leveraging the financial system is not an issue. We have very well capitalized, large banks,” Powell stressed at the press conference.