Federal Reserve Chairman Jerome Powell responded to the latest data on employment in the U.S. positively but reiterated his view that the economic recovery has a long road ahead and that interest rates will remain low for a while.
“Today’s jobs report was a good one,” Powell told National Public Radio in an interview Friday. “Through May and June, we got quite a few people back to work.”
The U.S. labor market extended its rebound for a fourth month in August, as the unemployment rate fell by almost 2 percentage points, to 8.4%, and employers added 1.37 million workers to their payrolls. The much better-than-expected improvement in the jobless rate spanned demographic groups, while the payroll gains were broad-based across industries.
Other economic data have been mixed. While manufacturing expanded in August at its fastest pace since late 2018, consumer spending — the heart of the U.S. economy — cooled in July.
Powell told NPR that he sees interest rates staying low for years.
“We think that the economy’s going to need low interest rates, which support economic activity, for an extended period of time,” he said, according to write-up of the interview by NPR. “It will be measured in years.”
At their June meeting, all 17 Fed policy makers projected that the federal funds rate they target would remain near zero this year and next. And all but two saw rates staying at that level in 2022. Officials will provide updated quarterly forecasts at their Sept. 15-16 meeting, including for the first time projections for 2023.
The Fed last week unveiled a new long-term strategy for conducting monetary policy under which it will seek an average 2% inflation rate over time and “broad-based and inclusive” gains in the jobs market. The new framework, which was 1 1/2 years in the making, was seen as reinforcing the Fed’s ultra-expansionary monetary policy.
A series of policy makers this week suggested that they were in no rush to build on the framework by providing more specific details on their interest-rate plans — so-called forward guidance.
Following its last meeting on July 28-29, the policy making Federal Open Market Committee said it expects to keep short-term interest rates pinned near zero “until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price-stability goals.”
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