Fed Chief Says U.S. Economy Is at an ‘Inflection Point’ as Risks Remain
“It’s going to be smart if people can continue to socially distance and wear masks,” Jerome Powell said on “60 Minutes.”,
WASHINGTON — The economy is at an “inflection point” and on the cusp of growing more quickly, the Federal Reserve chairman, Jerome H. Powell, said in an interview broadcast on Sunday night. But he warned that the crisis was not yet over.
In the interview, with “60 Minutes” on CBS, Mr. Powell said that the American economy “has brightened substantially” as more people are vaccinated and businesses reopen. But he cautioned that “there really are risks out there,” specifically coronavirus flare-ups, if Americans return to normal life too quickly.
“The principal risk to our economy right now really is that the disease would spread again more quickly,” he said. “And that’s troubling. It’s going to be smart if people can continue to socially distance and wear masks.”
The Fed has held interest rates near zero since March 2020 and has been buying about $120 billion in government-backed bonds each month, policies meant to stoke spending by keeping borrowing cheap. Fed officials have been clear that they will continue to support the economy until it is closer to their goals of maximum employment and stable inflation — and that while the situation is improving, it is not there yet.
Mr. Powell reiterated that approach on Sunday, saying that the central bank would “consider raising rates when the labor market recovery is essentially complete, and we’re back to maximum employment, and inflation is back to our 2 percent goal and is on track to move above 2 percent for some time.”
But he said it would “be a while until we get to that place.”
Discussing inflation, Mr. Powell once again made clear that the Fed wanted to see “sustainable” price increases before it adjusted monetary policy.
“Inflation has been below 2 percent,” he said. “We want it to be just moderately above 2 percent. So that’s what we’re looking for.”
“And when we get that,” he added, “that’s when we’ll raise interest rates.”
Some prominent onlookers have warned that the economy has the potential overheat as the federal government pumps out trillions of dollars in stimulus aid and other spending and as the economy reopens, allowing consumers to spend more money.
So far, no sustained inflation spike has materialized.
Figures show the economy is recovering, albeit slowly. Employers added more than 900,000 workers to payrolls last month, but the country is still missing millions of jobs compared with February 2020, and just last week state jobless claims climbed.
Mr. Powell on Sunday highlighted that while some workers were doing well, others had yet to get back to where they were before Covid-19 lockdowns, a phenomenon that will influence when the Fed reduces or removes policy support.
“What you’re seeing is some parts of the economy are doing very well, have fully recovered, have even more than fully recovered in some cases,” Mr. Powell said. “And some parts haven’t recovered very much at all yet. So you do see real disparities between different parts of the economy. It’s sort of unusual for an economy like ours.”
Mr. Powell also pointed to data that shows the burden is falling hardest on those least able to bear it: Lower-income service workers, who are heavily people of color and women, have been hit hard by job losses.
While he expects those workers to get back to their jobs more quickly as the economy rebounds, the Fed needs to “stick with those people and support them as they try to get back to where they were in life, which was working,” he said, adding, “They were in jobs just a year ago.”