Federal Reserve Chairman Jerome Powell reaffirmed his commitment to keeping interest rates low for the foreseeable future, even as he expressed hope of a strong economic recovery.
“When the time comes to raise interest rates, we will certainly do that, and it is not anytime soon,” the central bank head said Thursday during a Q&A session presented by Princeton University.
During a broader discussion, Powell discussed how the Fed addresses the challenges posed by the COVID-19 epidemic, as well as his expectations for what lies ahead.
In the latest policy statement released in December, the Federal Open Market policy committee said it would maintain a relaxed stance until it saw it. “Significant progress” towards employment goals and inflation.
In the employment order, Powell highlighted the Fed’s new approach to inflation, which will not raise rates even if unemployment falls below a level that has historically been a warning sign for future price pressures.
“That would not be the reason for raising interest rates unless we begin to see inflation or other imbalances that would threaten our achievement,” he said.
One of the imbalances is inflation. In recent days, some Fed officials have warned that inflation could move faster than the central bank estimates and could force some of its policy to be withdrawn earlier than board members had anticipated.
The Fed’s standard short-term loan rates have been held near zero and are still buying at least $ 120 billion in bonds each month. Core inflation was around 1.4%, well below the Fed’s 2% target.
“If inflation moves up in an unsatisfactory fashion, we have a tool for that, and we’ll use it,” he said.
Powell noted that although the economy faces serious challenges and there is a long way to go until the labor market is recovered, the economy is facing serious challenges. But there is a reason for optimism.
“We were in a good place in February 2020 and we thought we could get back there, I would say faster than we feared,” he said.
Powell spoke on the same day as the Labor Department reported the highest increase in jobless claims since August.
The release comes the week after the department reported a first decline in non-agricultural employment since April amid interest in the leisure and hospitality sector due to related restrictions. With COVID
Despite those challenges, Powell said the economy faces a promising future, in part because of the lack of contact that emerged during the 2008 financial crisis.There were some concerns about the continued rise in debt. Organization, including prolonged stock market valuation But the Fed chair said he was not concerned about those problems.
“All our economies and economies face many long-term challenges,” he said, “but I would say there is no obvious imbalance that threatens continuous expansion. You can’t identify something that looks like something. This will explode the expansion “