Federal Reserve Chairman Jerome Powell
Kevin Lamarque | Reuters
Despite its rapidly recovering economy, Federal Reserve Chairman Jerome Powell on Sunday reiterated the central bank’s commitment to maintaining loose monetary policy.
That includes a statement with near certainty that interest rates are going nowhere as inflation remains tame and millions of Americans continue to need help as the nation rebuilds from the damage caused by the Covid-19 pandemic.
“I think it is highly unlikely that we will raise interest rates this year,” Powell told 60 Minutes journalist Scott Pelley on a program on Sunday evening.
“I am able to guarantee that the Fed will do whatever it takes to support the economy for as long as it takes to complete the recovery,” he added.
This support includes near-zero short-term lending rates and $ 120 billion per month bond purchases made after a strong rebound from the decline in activity between February and April 2020.
Although the economy has regained more than 13 million jobs since the depths of the crisis, it still sidelined about 9 million more. As states and communities eased restrictions, more people got back to work.
But Powell said more needs to be done, especially for those in the lower income brackets who have suffered the most.
“We don’t have the answers to everything, but the work we do for the public good is incredibly important and we understand that if we do things right, we can really help people,” he said. “If the people on the fringes of the economy are doing well, the rest will take care of themselves.”
In their latest economic forecast, Fed officials saw GDP increase 6.5% in 2021, which would be the fastest growth rate since 1984.
“We and many private sector forecasters are seeing strong growth and job creation immediately,” said Powell. “Really, the outlook has brightened considerably.”
That is not to say that there are no material risks.
Powell said he was concerned about rising Covid cases and said people should continue to wear masks and physical distance to keep recovery going. While he said he wasn’t worried about the stability of the financial system, he was concerned about ongoing cyberattacks that could one day cause serious damage.
One thing he’s not worried about is inflation, which is currently at 1.6%, well below the Fed’s 2% target. The central bank has pledged to keep interest rates low, even if inflation was slightly above the target rate for a period of time.
When it comes to inflation, Powell said he “likes to see it on the right track to hover moderately above 2% for some time. If we get that, we will raise rates.”
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