The US Federal Reserve is expected to weigh up the advantages and disadvantages of digital currencies and payment systems in a working paper in September.
Fed chief Jerome Powell called the study in a congressional hearing on Wednesday an important step in deciding whether the Fed should issue digital money.
According to Powell, this would be supported by the fact that it might be a more sensible alternative to a spectrum of many private initiatives for cryptocurrencies and stablecoins.
If there was a digital US currency, private initiatives would probably no longer be needed, said the Fed chief.
Unlike the Fed, the European Central Bank (ECB) has already set an important course for the possible introduction of a digital euro. The monetary authorities decided to start the project of a digital version of the common currency. This investigation phase should now last 24 months. First of all, key questions such as the design and distribution of a digital euro should be clarified. So far there had only been preliminary work on this. The investigation phase will not anticipate the decision to introduce a digital euro, said the ECB. This will be decided later. Around 90 percent of all central banks worldwide are currently exploring whether they should issue digital versions of their currencies. So far, however, none of the major countries has introduced their own digital currency.China is currently the most advanced. Test runs with a digital yuan have already been started there in metropolises such as Shanghai or Shenzhen.
Despite the real estate boom and mortgage purchases by the central bank, Powell currently sees no dangers looming like the outbreak of the financial crisis.
House prices rose at a rapid pace across the country, he told a congressional committee on Wednesday.
But so far there are no signs that the market will be driven by “risky lending”.
The mortgage securities acquired by the Fed as part of its security purchases are only one factor among many, but not particularly important, in connection with the rise in house prices.
High inflation rate only temporarily
The central bank will speak at its next interest rate meeting at the end of the month on the subject of scaling back security purchases, even if the time for this maneuver is still a long way off. Powell reiterated that the inflation rate, which is currently well above the central bank's target of 2 percent, is temporary and will give way "in the coming months". In addition, the labor market is still “a long way” from the level at which the central bank will cut back monetary policy support for the economy. Nevertheless, the Fed will deal with the meltdown of purchases at the end of July and also take into account the situation on the housing market.
Powell will talk to Treasury Secretary Janet Yellen and regulators about the booming housing market on Friday, according to Bloomberg's finance agency. The meeting of the so-called Financial Stability Oversight Council (FSOC) should serve to discuss the dangers that could result from it. It should be ensured that the US does not slide back into a situation like in 2008, when the bursting of a real estate price bubble triggered a global financial crisis. This plunged the United States and, as a result, many countries around the world into recessions.
St. Louis District Fed chief James Bullard recently expressed concern that the US Federal Reserve's bond purchases could risk the real estate market overheating.
The Federal Reserve is supporting the economy hit by the Corona crisis with the purchase of government bonds and mortgage securities (MBS) worth $ 120 billion a month.
It intends to hold onto this until substantial progress has been made in terms of price stability and the labor market.
Internally, the discussion in the Fed's management has already begun about how to approach the meltdown in bond purchases.
Some monetary watchdogs believe mortgage purchases could be scaled back sooner or earlier than government bond purchases.