Federal Reserve chairman says Interests rates will remain low for the foreseeable future

During a Q & A session hosted by Princeton University, US Federal Reserve Chairman Jerome Powell affirmed his commitment to keep interest rates low. He also expressed hope for a strong economic recovery from the impact of the coronavirus. 

Interest rates to remain low until the Federal Reserve achieves its employment and inflation goals

During the wide-ranging discussion, Powell outlined the Federal Reserve strategies towards handling the challenges brought by the COVID-19 pandemic, and the body’s prediction on what is ahead.

 

In its most recent policy statement, which was issued in December, the policymaking Federal Open Market Committee said it would keep an accommodating stance until it sees “substantial further progress” towards its employment and inflation goals.

 

Powell also stated the government body’s new approach to inflation which involves keeping the interest’s rates low even if unemployment falls below levels that are considered a warning sign for pricing pressures ahead.

 

“That wouldn’t be a reason to raise interest rates, unless we start to see inflation or other imbalances that would threaten the achievement of our mandate,” he said.

Inflation might affect the Federal Reserve’s mandate on low interest rates

Recently, a few Fed officials have warned that inflation could move up sooner than the central bank expects, which might force the removal of some policy accommodation sooner than committee members have forecast.

 

The Fed’s benchmark short-term borrowing rate is anchored near zero, and it is continuing to buy at least $120 billion in bonds each month. Core inflation is running around 1.4%, well below the Fed’s 2% target.

 

Powell added there is hope for the economy even as it currently faces powerful challenges.

 

“We were in a good place in February 2020, and we think we can get back there, I would say, much sooner than we had feared,” he said.

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