WASHINGTON – The economy is at a “turning point” and on the verge of faster growth, Federal Reserve Chairman Jerome H. Powell said in an interview that aired Sunday night. But he warned that the crisis was not over yet.
In the interview with “60 Minutes” on CBS, Powell said the American economy “brightened significantly” as more people were vaccinated and businesses reopened. But he warned that “there are really risks out there,” especially coronavirus flare-ups, if Americans return to normal life too quickly.
“The main risk to our economy right now is that the disease will spread faster,” he said. “And that’s worrying. It will be wise if people can continue to distance themselves socially and wear masks. “
The Fed has kept interest rates close to zero since March 2020 and buys around $ 120 billion worth of government bonds every month. This policy is designed to boost spending by keeping borrowing cheap. Fed officials knew they would continue to support the economy until it gets closer to its goals of maximum employment and stable inflation – and that while the situation is improving, it is not there.
Mr Powell reiterated that approach on Sunday, saying that the central bank would “consider a rate hike when the labor market recovery is essentially complete and we return to maximum employment and inflation returns to our 2 percent target and on the right track is to move over 2 percent for some time. “
But he said it would “be a while before we get to this place”.
On inflation, Mr. Powell reiterated that the Fed wanted “sustainable” price increases before adjusting monetary policy.
“Inflation was below 2 percent,” he said. “We want it to be only moderately over 2 percent. This is what we are looking for. ”
“And when we get that,” he added, “we’ll raise interest rates.”
Some celebrity viewers have warned that the economy may overheat as the federal government pumps out trillions of dollars in stimulus and other spending, and re-opens the economy so consumers can spend more.
So far there has been no sustained rise in inflation.
Figures show that the economy is recovering, albeit slowly. Employers hired more than 900,000 workers last month, but the country is still lacking millions of jobs compared to February 2020, and state unemployment claims only increased last week.
Mr Powell stressed Sunday that while some workers were doing fine, others had not yet returned to where they were before the Covid-19 lockdown. This phenomenon will affect when the Fed reduces or removes policy support.
“What you are seeing is that some parts of the economy are doing very well, having recovered fully and in some cases even more than fully recovered,” Powell said. “And some parts haven’t recovered very much. So you see real differences between different parts of the economy. This is unusual for an economy like ours. “
Mr Powell also pointed to data showing that the hardest hit is those who are least able to bear it: lower-income service workers who are heavily colored and female have been hit hard by job losses.
While he expects these workers to get back to work faster when the economy recovers, the Fed needs to “stay with these people and support them as they try to get back to where they were in life, which worked,” he said adding, “You were in Jobs just a year ago.”