Interest rates will remain close to zero in the foreseeable future, Federal Reserve Chairman Jerome Powell said Thursday.
Why it’s important: It avoids worries that the central bank is looking to withdraw its monetary policy easily if the economy recovers faster than expected.
What it says: “When the time comes to raise interest rates, we will surely do so. By the way, this time is not soon, “he said during an event with Princeton University.
Powell also said “Now is not the time” to talk about any exit from the $ 120 billion in securities the Fed has been buying every month.
The big picture: Powell considered the prospect of higher inflation – some investors are preparing – which would force the Fed to consider hike rates to offset rising prices.
- “As the pandemic recedes and we potentially see a strong surge in spending as people return to their normal lives and start consuming various services,” this could put upward pressure on prices, Powell said.
- “But the real question is how big this effect is and it will be persistent,” Powell said, noting that it is unlikely to be persistent.
Get up to date fast: The Fed launched a new policy framework last summer that sought to make up for the fact that inflation for years has exceeded its 2% target, but has not set details, such as how long it would like to see inflation above of this level.
- “We haven’t tied ourselves – and we won’t – to a particular mathematical formula when we aim to achieve moderately above 2% inflation for some time,” Powell said.