Skip to main content

Fed will not be raising rates any time in the near future!



WASHINGTON (AP) — Federal Reserve Chairman Jerome Powell told Congress on Wednesday that the central bank will not start raising interest rates until it believes its goals on maximum employment and inflation have been reached.

Powell also warned that many who had worked in industries hardest hit by the pandemic and ensuing recession will likely need to find different jobs.

As he did before the Senate Banking Committee on Tuesday, Powell told the House Financial Services Committee that the Fed is in no hurry to raise its benchmark short-term interest rates or to begin trimming its $120 billion in monthly bond payments used to put downward pressure on longer-term rates.

Financial markets, which had begun to wane Tuesday on fears that higher inflation might trigger an earlier-than-expected tightening of credit conditions by the Fed, rebounded on Powell’s comments.

That trend extended into Wednesday with the S&P 500 index rising more than 1 percent.

Powell said the Fed does not see any indication inflation could race out of control. While price increases might accelerate in coming months, Powell said those increases are expected to be temporary and not a sign of long-run inflation threats.

He said the central bank would not start to trim its $120 billion in monthly bond purchases until “substantial further progress” has been made toward the Fed’s goals on inflation and employment.

Hikes in the Fed’s benchmark interest rate, now at a record low of zero to 0.25 percent, will not occur until the Fed has seen inflation reach its 2 percent target and run slightly above that level, with employment falling to a level viewed as maximum employment, he said.

Powell has noted recently that, while the official U.S. unemployment rate in January dropped to 6.3 percent, the actual rate is closer to 10 percent when taking into account the millions of people who have given up looking for a job.

Even as the job market improves, a portion of the 10 million people still out of work may find it hard to get new jobs, he said. He attributed that to the changes brought on by the pandemic in such industries as retail services and tourism.

In many cases, the jobs people left may no longer be there, which will mean those workers will need access to job retraining to find work in other areas, Powell said.

The House is expected to take up later this week President Joe Biden’s proposed $1.9 trillion relief measure, which includes stimulus payments of up to $1,400 for individuals and expanded unemployment benefits and support for state and local governments.

Republicans have attacked the measure as too expensive and unnecessary given growing signs that the country doesn’t need further support. Democrats, however, have argued that with nearly 10 million still out of work compared to a year ago, further support is needed.

Powell repeatedly refused to take a position on Biden’s proposal, saying that it was up to Congress and the administration to decide.

While repeating his comment in his Senate testimony that he believes the economy is a “a long way from our employment and inflation goals,” Powell did agree with that there have been some encouraging signs that the economy could accelerate further as new COVID-19 cases decline and vaccines are more widely distributed.

Some private forecasters have said the overall economy might grow at a rate of 6 percent or better this year, after having shrunk 3.5 percent last year, the worst performance since 1946. GOP lawmakers pressed Powell to say whether he thought such a growth rate was possible, but he refused to be pinned down to a specific target for gross domestic product growth.

“There is a reason for optimism in the second half of the year if we get the pandemic under control,” Powell said.

Comments

Popular posts from this blog

NCOFCU Newsletter

The Bucket Coach is a financial advice book designed by Fire Services Credit Union, Tronto, Canada. and written exclusively for Fire Fighters It's a practical guide for household financial management, including investments, credit and mortgages, and retirement. Developed with contributions from Fire Fighters," NCOFCU Newsletter : " Kevin Connolly Chief Executive Officer    Fire Services Credit Union Phone: 416-440-1294 ext 301  Toll Free: 1-866-833-3285 E-mail:  kevin@firecreditunion.ca 1997 Avenue Rd Toronto, ON M5M 4A3 

CUNorthwest Todd A. Powell Award is SFCU CEO Gayle Furness.

Spokane Firefighters Credit Union Big Enough to Serve. Small Enough to Care. This year’s recipient of the CUNorthwest Todd A. Powell Award is SFCU CEO Gayle Furness. Like Todd, Gayle has been instrumental in the growth, as well as the safety and soundness, of the credit union. Congrats to Gayle for living up to the standard that Todd created for our organization and the greater credit union community. __ ________________________________ Check out NCOFCU's additional features: First Responder Credit Union Academy Podcasts YouTube Mini's Blog Job Board

The Shrinking Pool of Small Credit Unions: Why It Matters & What We Can Do About It. - Henry Meier, Esq.

  Henry Meier, Esq. Henry Meier is the former General Counsel of the New York Credit Union Association, where he authored the popular New York State of Mind blog. He now provides legal advice to credit unions on a broad range of legal, regulatory and legislative issues. He can be reached at (518) 223-5126 or via email at  henrymeieresq@outlook.com . For as long as I’ve been around the industry, I’ve heard concerns about the demise of the small credit union. But I’ve come to realize it’s a lot like the weather: Everyone talks about it, but no one does anything about it. This is unfortunate. We need credit unions of all shapes and sizes to survive, and if we don’t take action soon, it will be too late.  Fortunately, there are steps the industry can take to potentially decrease the rate at which small credit unions are disappearing by making it viable for credit unions to survive by getting larger credit unions interested in making the necessary investments to keep the sma...

What Are Your Plans -As Government Shutdown Continues, Credit Unions Expand Offers of Assistance

BILOXI, Miss.— With the federal government shutdown now entering its second week, an increasing number of credit unions across the country are offering relief and financial assistance. All indications are the shutdown is no closer to ending than it has been since it began on Oct. 1. While the House has passsed a continuing resolution (CR) to fund government operations in the short term, the Senate remains at an impasse, even as it has scheduled a vote for today. In addition to the earlier assistance reported by the CU Daily  here , the latest pledges to support members include: • In Biloxi, Miss., Keesler FCU said it is offering paycheck relief for all eligible federal employees affected by the shutdown and will advance the amount of direct deposit paychecks for eligible members during the shutdown for up to 90 days. There is no cost or fee to enroll in the program. • In Nebraska, Cobalt Credit Union is offering furloughed members loans of up to $5,000 with no fees or interest...

Sunday Reading - FIRE, 101 - “financial independence, retire early,”

  Retiring at 30     FIRE, 101 Most US workers aim to retire around age 65—but for many followers of the FIRE movement, which stands for “ financial independence, retire early ,” that’s not the case. FIRE followers, who range from low- to high-income workers, typically prioritize high savings rates, relatively frugal living, and aggressive investing strategies in an effort to work less and enjoy life more in the long-term ( see five distinct approaches ). While many proponents argue that the movement is more of a mindset about achieving financial freedom than any ...