When it comes to lifting shorter-term interest rates, their classic policy tool, officials have been clearer about precisely what they want to accomplish before adjusting their cheap-money stance.
“That’s going to depend entirely upon the path of the economy,” Mr. Powell said of the plan for interest rates. He said the country had to get to maximum employment, inflation must sustainably reach 2 percent, and those price gains must be on track to exceed 2 percent for some time.
“Those are the conditions,” he said. “When they arrive, we will consider raising interest rates. We’re not intending to raise interest rates until we see those conditions fulfilled.”
Even as many analysts anticipate higher inflation this year after very weak price increases in 2020, Mr. Powell was careful to draw a distinction between a short-term pop and a sustained acceleration.
“If we do see what we believe is likely a transitory increase in inflation” then “I expect that we will be patient,” Mr. Powell said. “There’s a difference between a one-time surge in prices and ongoing inflation.”
And when it comes to the job market, he pointed out that American employers now report 10 million fewer jobs than before the pandemic, leaving a lot of room for a labor rebound. The unemployment rate, which will be updated Friday, stood at 6.3 percent in January — still well above its 3.5 percent rate last year. And that understates the pandemic’s labor market cost, since many people have stopped looking for work altogether and are not counted into the official jobless number.
Initial jobless claims increased last week after a big drop the prior week, the latest report showed, showing that the labor market’s recovery remains rocky for now, though a better performance might lie ahead as vaccines allow the economy to reopen more fully.
Article source: https://www.nytimes.com/2021/03/04/business/economy/federal-reserve-powell-economy.html
Speak Your Mind
You must be logged in to post a comment.