WASHINGTON – Federal Reserve Chair Jerome Powell underscored the U.S. economy's ongoing weakness Tuesday in remarks that suggested that the Fed sees no need to alter its ultra-low interest rate policies anytime soon.
“The economic recovery remains uneven and far from complete, and the path ahead is highly uncertain,” Powell said in testimony to the Senate Banking Committee.
Powell's comments are in contrast to the increasing optimism among many analysts that the economy will grow rapidly later this year. That outlook has also raised concerns, though, about a potential surge in inflation and has fueled a sharp increase in longer-term interest rates this year.
Most economists say they think the Fed’s continued low rates, further government financial aid and progress in combating the viral pandemic could create a mini-economic boom as soon as this summer. Powell acknowledged the potential for a healthier economy. But he stressed the personal hardships caused by the pandemic, especially for unemployed Americans.
“As with overall economic activity, the pace of improvement in the labor market has slowed,” Powell said. “Although there has been much progress in the labor market since the spring, millions of Americans remain out of work.”
Powell's focus on the economy's challenges reflects his reluctance to send any signal that the Fed is considering pulling back on its efforts to boost economic growth and hiring. The Fed cut its benchmark short-term interest rate to nearly zero last March in response to the pandemic recession. It is also purchasing $120 billion a month in bonds in an effort to hold down longer-term rates.
Powell reiterated that those purchases will continue until “substantial progress” has been made toward the Fed's goals of low unemployment and stable inflation at about 2% annually.
The economy may improve rapidly later this year, Powell said, "but the job is not done yet, the job is not done.”