Federal Reserve Board Chair Jerome Powell promised that the US central bank would keep benchmark lending rates low until the economy was full employment and inflation was consistently rising.
This guarantee comes amid growing market concerns that a rapid recovery from a pandemic will lead to higher interest rates.
Powell argued that the Fed would keep interest rates near zero at current levels until the economy “rises to 2% maximum employment and inflation and is on track slightly above 2% for some time.” ..
But he warned, “The economy is far from our employment and inflation goals, and it is likely that it will take some time before substantial further progress is achieved.”
Similarly, the central bank said on the first day of its semi-annual testimony before Congress, it would continue to buy bonds “at least at its current pace, until substantial further progress is made towards our goals.” It was.
Some economists have expressed concern about the surge in inflation as Congress moves to approve President Joe Biden’s $ 1.9 trillion bailout plan, raising expectations for a rapid recovery in economic activity. ..
Yields on 10-year government bonds, an important red flag of inflation, soared, hitting stocks in fear that the Fed would have to raise interest rates faster than expected. It will hinder the ability of businesses to borrow in an already debt-filled economy.
Powell has previously downplayed these concerns, stating that the Fed has tools to deal with the situation, while prices could rise temporarily after the pandemic ceases.
Inflation barely broke the Fed’s 2% target, even when the unemployment rate hit a 3.5% low for the first time in 50 years in early 2020, more than a decade after the 2008 global financial crisis.
As a result, the central bank revisited its policy, saying it would ignite inflation until it actually exceeds the 2% level for long periods of time, rather than raising lending rates to curb inflation as unemployment falls.
In testimony prepared for submission to the Senate Banking Commission, Powell said recovery would take some time to reach that point, but hopes the Covid-19 vaccine will return to normal quickly. doing.
“The course of the economy continues to depend heavily on the course of the virus,” he said, but “continuous progress in vaccination should help accelerate the return to normal activity.” It was.
Powell has repeatedly emphasized low unemployment benefits to enable him to deliver the benefits of a growing economy to African Americans and Hispanics who have been hit hardest by the business closures caused by the pandemic.
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Fed’s Powell Pledges Low Rates Until Inflation Exceeds 2% Source link Fed’s Powell Pledges Low Rates Until Inflation Exceeds 2%