Powell: Recovery is Far From Complete

The Federal Reserve on Wednesday said that while improved vaccine distribution has contributed to an uptick in economic activity, the economy still has a long way to go. Similar to last month and on par with expectations, officials left interest rates near-zero and maintained their current asset purchase pace. 

“The economy is a long way from our goals and is likely to take some time for substantial further progress to be achieved,” Chairman Jerome Powell said in Wednesday’s remarks. “We expect to maintain an accommodative stance to monetary policy until these employment and inflation outcomes are achieved.”

Powell reiterated that the Fed will not pull back its current expansive economic policy until inflation has moderately exceeded 2% “for some time.” There are no plans to taper the current quantitative easing program. The Fed is currently buying bonds at $120 billion per month. 

The Fed addressed the current rate of inflation, which has been a top concern for consumers, but attributed the recent higher readings to “transitory factors.” Powell reiterated that higher prices will be short lived. 

“We’re making our way through an unprecedented series of events in which a synchronised global shutdown is now giving way to widespread reopening of economies,” said Powell. “During this time of reopening, we are likely to see some upward pressure on prices, but those pressures are likely to be temporary, as they are associated with the reopening process.” 

He stressed that in the event that inflation gets out of hand, the Fed is “prepared to use their tools.” 

During their March meeting, the Fed described the economy as facing “considerable risks,” but has since struck the word ‘considerable’ from their most recent statement. Powell emphasized that while employment is not yet back to pre-pandemic levels, recent initial jobless claims have fallen to the lowest levels since March 2020. 

Powell once again emphasized that while the Fed will continue to explore what a central bank digital currency could mean for the US economy, they are in no rush to establish their own.  

“Another country might have a digital currency first,” said Powell. “I am not so concerned about that. I am really concerned about getting it right, in a world where we already have a highly evolved payments system.”