Interest rates will remain close to zero for the foreseeable future, Federal Reserve Chairman Jerome Powell said Thursday.
Why it matters: It allays concerns that the central bank will withdraw its lenient money policy if the economy recovers faster than expected.
What he says: “When it comes time to raise interest rates, we sure will. By the way, that time is not fast enough, ”he said at an event with Princeton University.
Powell also said “Now is not the time” to talk about a possible exit from the $ 120 billion in securities the Fed buys each month. The purchases have flooded the stock market with liquidity.
The big picture: Powell weighed in on the prospect of higher inflation – some investors brace themselves – which would force the Fed to consider rate hikes to counter rising prices.
- “As the pandemic abates and we see a potentially strong spending wave as people return to their normal lives and start using different services,” that could put upward pressure on prices, Powell said.
- “But the real question is how big that effect is and whether it will be persistent,” Powell said, pointing out that it probably won’t be persistent.
Overtaking quicklyThe Fed rolled out a new policy framework last summer that tried to compensate for inflation exceeding the 2% target for years, but has not set out details such as how long it would like inflation to stay above that level.
- “We have not, and will not, have bound ourselves to any particular mathematical formula for some time if we aim for inflation that has been slightly above 2% for some time,” Powell said.