Powell Confirms Fed to Maintain Easy-Money Policies Until Economy Recovers--Update
By Paul Kiernan
WASHINGTON -- Federal Reserve Chairman Jerome Powell reaffirmed
Thursday his intention of keeping the central bank's easy-money
policies in place until the labor market improves much further.
"Today we're still a long way from our goals of maximum
employment and inflation averaging 2% over time," Mr. Powell said
Thursday during an interview at The Wall Street Journal Jobs
Summit. The appearance came as brightening economic forecasts are
pushing up long-term borrowing costs, which could complicate the
Fed's efforts to keep interest rates low to support the
Mr. Powell's remarks came at his last scheduled public event
before the Fed's next policy meeting on March 16-17. He said the
central bank would maintain ultralow interest rates and continue
hefty asset purchases until "substantial further progress has been
made" toward its employment and inflation goals.
He said he expected it would take "some time" to get there, but
repeatedly declined to be more specific about an anticipated time
Asked about the recent surge in bond yields -- which has come as
investors anticipate a pickup in inflation and economic growth this
year -- the Fed chair said it "was something that was notable and
caught my attention."
He said, "I would be concerned by disorderly conditions in
markets or a persistent tightening in financial conditions that
threatens the achievement of our goals." And he added that the Fed
is looking at "a broad range of financial conditions," rather than
a single measure.
Fed officials will release at this month's meeting their first
set of projections for interest rates and the economy since
December, which will be of acute interest to the markets.
Steady progress in vaccinating people against Covid-19, combined
with trillions of dollars of fiscal stimulus, have led forecasters
to predict a quicker bounceback in economic activity than they
expected last year. Many market participants also expect that a
burst of spending once the economy fully reopens will push
inflation above the Fed's 2% target, a situation that in the past
would have prompted tighter monetary policy.
But more than a decade of weak inflation led Fed officials last
year to swear off raising interest rates in anticipation of rapidly
rising prices. Mr. Powell said last week that the Fed doesn't
foresee raising its benchmark fed-funds rate from near zero until
three conditions have been met: a range of statistics indicate that
the labor market is at maximum strength, inflation has hit its 2%
target and forecasters expect inflation to remain at that level or
Inflation remains below 2% and the labor market remains well
short of its pre-pandemic condition, with some 10 million fewer
jobs. While he said on Thursday that he was hopeful the labor
market would show progress in the coming months as the economy
starts to reopen, he said there was "significant ground to
Asked if there is a chance the labor market might reach the
Fed's goal of maximum employment this year, Mr. Powell said, "No, I
think that's highly unlikely."
The Fed cut short-term rates to near zero last year and since
June has bought at least $120 billion a month of Treasury debt and
mortgage-backed securities. Policy makers say the efforts have
reduced borrowing costs and are providing meaningful support to the
But yields on 10-year Treasury notes, which influence
longer-term borrowing costs for consumers and businesses, have
risen notably in recent weeks.
The average rate on a 30-year fixed-rate mortgage rose above 3%
this week for the first time since July, Freddie Mac said Thursday,
a trend that has started to weigh on applications to buy or
Write to Paul Kiernan at email@example.com
(END) Dow Jones Newswires
March 04, 2021 13:29 ET (18:29 GMT)
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