Highlights of Powell hearing at a glance: Moderate 25bp rate hike expected in March, cryptocurrencies a 'speculative tool'

Original Author: Mary Liu

Original source: BitpushNews

Original source: BitpushNews

On the morning of March 2, US Eastern Time, Federal Reserve Chairman Jerome Powell attended the House of Representatives Financial Services Committee to provide testimony for the Federal Reserve's semi-annual monetary policy report and accept questions from members. At the meeting, Powell said that the Russia-Ukraine war has injected uncertainty into the US economic outlook, but he reiterated that it is still appropriate to raise interest rates and supported a 25 basis point increase in interest rates in March.

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rate hike expectations

Powell said: "The impact on the U.S. economy is highly uncertain and we will be watching the situation closely ... The near-term impact on the U.S. economy of the invasion of Ukraine, the ongoing war, sanctions, and upcoming events remains highly uncertain, and in this environment Appropriate monetary policy requires a recognition that the economy has moved in unexpected ways. We need to be flexible to future data and changing outlooks."

Powell told the meeting that he would be open to more aggressive moves if inflation worsens, meaning the Fed is ready to increase interest rate hikes in one or more future meetings.

Market expectations for rate hikes for the rest of the year have declined since the start of the Russo-Ukrainian war, according to CME Group's FedWatch data. Traders are now pricing in five quarter-point increases that would take the benchmark federal funds rate to a range of 1.25%-1.5% from the current range of 0%-0.25%.

secondary titleencryption regulationOn the subject of cryptocurrencies,

. “Existing digital currencies … are really speculative vehicles. They’re not used for payments, they’re not stores of value, they’re speculative vehicles (like gold does). That’s what they’re for,” he said.

He said:Powell made it clear that the development of cryptocurrencies should not impede the ability of law enforcement agencies to track payments, especially as the outbreak of the Russia-Ukraine war has highlighted the need for encryption regulation.

He said:

Powell also mentioned that another example of crypto’s urgent need for regulation is the potential for terrorists or other malicious actors to misuse cryptocurrencies for wrongdoing. He compared the cryptocurrency industry to the early days of railroads and telephones, adding that a framework is needed to Preventing unbacked cryptocurrencies from being used as “tools for terrorist financing and tax avoidance in general,” he said: “Cryptocurrencies are a means of evading law enforcement, and that’s not something we should tolerate.”

Last July, Powell told Congress that stablecoins (crypto tokens pegged to fiat currencies such as the U.S. dollar) should be regulated “in a similar way” to bank deposits and money market mutual funds. Bitui previously reported that in January this year, Powell said that the Federal Reserve will soon release a report on central bank digital currencies and cryptocurrencies.

secondary titleCBDC and Stablecoins

Powell also touched on the Fed's plans around a central bank digital currency (CBDC). He pointed out that

A CBDC is unlikely to eliminate the use of private cryptocurrencies.

Despite strong opposition from other lawmakers, plans in the U.S. to roll out a CBDC have been slow. Congressman Juan Vargas (D-Calif.) asked about the Fed’s recent report on CBDCs during the meeting. Powell said the Fed is seeking public comments and it is an open question whether the benefits of CBDCs outweigh the costs. "It's going to be something we're going to invest a lot of time and expertise in...to get it right. We haven't decided whether we're going to roll it out yet," he said.