Federal Reserve Chairman Jerome Powell on Tuesday reaffirmed the US central bank’s intention to foster a “broad and inclusive” recovery in the labor market, and not to raise interest rates too quickly based solely on fears of a inflation looming.
“We will not raise interest rates preventively because we fear the possible appearance of inflation. We will wait for evidence of real inflation or other imbalances,” Powell said in an appearance before a committee of the United States House of Representatives.
The recent price hikes “do not speak of a generally tense economy” requiring higher interest rates, Powell said, but come from categories “directly affected by the reopening” of the economy.
In setting monetary policy, the Fed chief also said the central bank would keep an eye on a broad set of labor market statistics, including the situation of different racial and other groups.
“We will not just look at the main unemployment figures,” Powell told members of the House Select Subcommittee on the Coronavirus Crisis. “We will look at all kinds of metrics … That’s the most important thing we can do” to ensure that the benefits of the recovery are widely shared.
Lawmakers lobbied Powell on how the Fed was balancing rising inflation risks with its promise to ensure the economy recovers all jobs lost after the onset of the pandemic.
Until recently, there was little perceived conflict between those targets, but since Powell last appeared before the subcommittee in September, the central bank’s inflation outlook has doubled.
Projections released by the Fed last week showed that prices in 2021 are expected to rise at a rate of 3.4%, compared to 1.7% forecast last September.
Recent job growth, meanwhile, has been slower than expected, and Powell’s colleagues are now openly suggesting that the pandemic caused so many people to retire that it may be unrealistic to think the economy can return to employment. pre-crisis before the Fed has to tighten monetary policy.
That’s a stance contrary to Powell’s own approach to returning the economy to early 2020 conditions, and to that of the influential Democratic subcommittee chairman James Clyburn, who pressed the Fed chief on Tuesday to ensure a job recovery. fair and equitable that includes members of the Black and Hispanic communities.
