Fed chairman: no interest rate hike coming anytime soon

Interest rates will remain near zero for the foreseeable future, Federal Reserve Chairman Jerome Powell said on Thursday.

Why is this important: This avoids fears that the central bank will consider withdrawing from its easy monetary policy if the economy recovers faster than expected.

What he says: “When the time comes to raise interest rates, we certainly will. This time is not anytime soon, ”he said at an event with Princeton University.

Powell also said “Now is not the time” to talk about an exit from the $ 120 billion in securities the Fed buys each month.

The big picture: Powell weighed in on the prospect of higher inflation – some investors are bracing for it – which would force the Fed to consider a rate hike to counter rising prices.

• “As the pandemic recedes and we potentially see a strong spate of 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 is this effect and will it be persistent,” said Powell, noting that it is unlikely to be persistent.

Catch up quickly: The Fed rolled out a new policy framework last summer that sought to compensate for the fact that inflation for years has exceeded its 2% target – but did not give details, such as how long it would like to see inflation above this level.

• “We haven’t tied ourselves – and we won’t – to a particular mathematical formula when we aim to achieve inflation moderately above 2% for a period of time,” said Powell.