WASHINGTON – Federal Reserve Chairman Jerome Powell is due to answer questions on Thursday about the improving U.S. economic outlook and its implications for the job market, bond yields and central bank policies.
Mr. Powell will speak in a half-hour interview starting at 12:05 a.m. EST at the Wall Street Journal Jobs Summit. The emergence comes as improving economic forecasts push up long-term borrowing costs, which could complicate the Fed’s efforts to keep interest rates low to support the recovery.
Market participants will be listening intently in part because these are Mr. Powell’s last scheduled public remarks ahead of the Fed’s next policy meeting on March 16-17. He reaffirmed last week that the central bank will keep interest rates extremely low and continue to acquire massive amounts of assets until “further substantial progress is made” towards its employment and development targets. ‘inflation.
Fed officials will release their updated forecasts for interest rates and the economy since December at the meeting, which will be of keen interest for markets.
The steady progress in vaccinating people against Covid-19, combined with billions of dollars in fiscal stimulus, has led forecasters to predict a faster rebound in economic activity than they expected last year . Many market participants also expect that a spending surge once the economy fully reopens will push inflation above the Fed’s 2% target, a situation that in the past would have prompted a tighter monetary policy.
But more than a decade of low inflation led Fed officials last year to swear to raise interest rates in anticipation of rapidly rising prices. Mr Powell said last week that the Fed does not plan to raise its benchmark federal funds rate to near zero until three conditions are met: A series of statistics indicate the labor market is peaking , inflation has reached 2%. the target and forecasters expect inflation to stay at or above that level.
He also said the Fed’s employment and inflation targets are “likely to take some time” to reach. Inflation remains below 2% and the labor market remains well below its pre-pandemic state, with some 10 million fewer jobs.
The Fed cut short-term rates close to zero last year and since June it has bought at least $ 120 billion a month in Treasury debt and mortgage-backed securities. Policymakers say the efforts have reduced borrowing costs and are providing significant support to the economy.
But yields on 10-year Treasuries, which influence long-term borrowing costs for consumers and businesses, have risen markedly in recent weeks. Mr Powell said in recent appearances that he was not concerned about rising bond yields, which he attributed to growing optimism about the recovery.
But Fed Governor Lael Brainard said on Tuesday that a sharp rise in Treasury yields last week “caught my eye.”
“I am very attentive to market developments,” Ms. Brainard said in a video appearance. “I would be concerned if I saw messy or persistent tightening and financial conditions that could slow progress towards our goal.”
Write to Paul Kiernan at [email protected]
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