Powell stresses commitment to full employment and low rates

Federal Reserve Chairman Jerome Powell testifies before a House Financial Services Committee hearing on Capitol Hill in Washington, Wednesday, Dec. 2, 2020. (Greg Nash/Pool via AP) (The Hill)

WASHINGTON – Federal Reserve Chair Jerome Powell on Wednesday underscored the Fed's commitment to reducing unemployment to multi-decade lows, where it stood before the pandemic, while signaling little concern about the risk of potentially high inflation or financial-market instability.

Powell stressed during a webcast to the Economic Club of New York that the U.S. job market remains weak despite having improved from the depths of the pandemic-induced recession.

And he signaled that the Fed isn't considering any increase in its benchmark short-term interest rate from its level near zero. He also said the central bank is not currently considering any reductions to the size of its $120 billion in monthly bond purchases, which are intended to keep longer-term interest rates low.

The chairman did not refer to the surging stock market or to recent signs of market froth, like the explosive volatility in the prices of GameStop and other stocks targeted by ordinary day traders.

He emphasized, as he frequently has before, that the loss of millions of jobs has fallen disproportionately on the least-advantaged households.

“Despite the surprising speed of recovery early on, we are still very far from a strong labor market whose benefits are broadly shared,” Powell said.

Powell's language “would sound remarkable to an earlier generation of central bankers,” said Krishna Guha, an analyst at the investment bank Evercore ISI, in a note to clients. His speech “placed restoring a strong labor market at the heart of the central bank’s agenda to a greater extent than perhaps ever before while playing down concerns about potential excess inflation."

He noted that roughly 4 million people who are out of work have stopped looking for jobs, which means they aren’t counted as unemployed. If they were, the unemployment rate would be closer to 10%.