“While the level of new cases remains worrying,” he said, “continued vaccinations should allow a return to more normal economic conditions later this year.”
Fed officials have signaled that they will keep interest rates low and bond purchases will continue at the current rate of $ 120 billion a month until the recovery is more complete. The Fed has announced that it would like to see “significant” further progress before recalling buying government-backed bonds, a policy designed to make many types of borrowing cheap. The hurdle for rate hikes is even higher: officials want the economy to return to full employment and hit 2 percent inflation, with the expectation that inflation will stay higher for some time.
“A temporary rise in inflation above 2 percent this year would not meet that standard,” Powell said of the Fed’s criteria for meeting its average inflation target before interest rates rose. When it comes to buying bonds, “the economy is far from our goals and it will likely be some time before significant further progress is made”.
He later said that “the time is not yet” to talk about reducing or “rejuvenating” bond purchases.
Unemployment, which peaked at 14.8 percent last April, has since fallen to 6 percent. Retail spending is strong and supported by repeated government stimulus measures. Consumers have amassed a great deal of savings over months, so there is reason to believe that once the economy reopens fully, things could accelerate further.
Still, there is room for improvement. The unemployment rate is still well above the value of 3.5 percent that is caught in the pandemic, with black workers and workers with poorly paid jobs being disproportionately unemployed. Some companies have closed forever and it remains to be seen how changes in daily patterns after a pandemic will affect others, such as: B. Corporate offices and the companies that serve them.
“There’s no playbook here,” said Michelle Meyer, director of US economics at Bank of America, adding that the Fed needed time to let inflation play and heal the job market, and that central bankers needed time would only do so while the signs were encouraging, “Respond when you have enough evidence.”
The Fed has repeatedly stated that it wants to see a realized improvement in economic data – not just an expected cure – before reducing its support. Based on their March economic projections, most Fed officials expect interest rates to be close to zero by at least 2023.
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