Speaking before the Senate Banking Committee on Feb. 23, Federal Reserve chair Jerome Powell said that developing a digital dollar for the United States is a “high priority.”
Shifting Gears for Digital Dollar
In the past, Powell has said that the Federal Reserve is considering a digital dollar or central bank digital currency (CBDC).
However, the Federal Reserve is in no hurry to implement it. Powell has previously said that it is more important to “get it right than be first” when it comes to digital currencies. He reiterated in today’s hearing that since the U.S. dollar is the world’s reserve currency, the U.S. does not need to immediately introduce a digital variant.
Nevertheless, Powell’s comments today suggest that the U.S. will eventually announce a digital currency. The United States has noticed China’s rigorous efforts to promote its digital yen and dethrone the U.S. dollar, perhaps increasing the likelihood that the U.S. will introduce its own digital dollar sooner rather than later.
Powell doesn’t expect the digital coin to affect monetary policies.
Powell Also Discusses Economic Policy
Powell additionally stated that the Federal Reserve will continue to keep economic policies accommodative—that is, designed to stimulate activity through low interest rates.
The target for employment is falling short of $10 million in weekly payroll, and inflation is “soft” below 2%. Therefore, the Federal Reserve will continue lending at zero interest rates, and will also buy government bonds to stimulate the economy.
The U.S. dollar index (DXY) against other fiat currencies stayed below support around $90.50 as inflationary fears held steady. Gold, which has seen a bullish reversal in the last couple of says on stimulus hopes, also continued to trade above support at $1,800.
Bitcoin and stocks continued to trade around the weekly bottom. The NASDAQ index traded near lows of $138.80, down 1.25% on a daily scale, while BTC traded around $47,000.
Disclosure: The author held Bitcoin at the time of press.