Interest rates will remain close to zero in the foreseeable future, Federal Reserve Chairman Jerome Powell said on Thursday.
Why does it matter: It raises concerns that the central bank is seeking to withdraw its light monetary policy if the economy recovers faster than expected.
What it says: “When the time comes to raise interest rates, we will certainly do so. By the way, that moment is not soon, “he said during an event with Princeton University.
Powell added “Now is not the time” to talk about any exit from the $ 120 billion in securities that the Fed buys every month.
The whole picture: Powell considered the prospect of higher inflation – some investors are preparing – which would force the Fed to consider hiking rates to counteract rising prices.
- “As the pandemic recedes and we see the potential for a strong surge in spending as people return to normal life and start consuming various services,” which could cause 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.
Catch yourself fast: Fed launches new policy framework last summer that has tried to make up for the fact that inflation has exceeded its 2% target for years – but did not set details, such as how much it would like to see inflation over this level.
- “We haven’t tied – and we won’t – to a certain mathematical formula when we aim to get inflation moderately above 2% for some time,” Powell said.