Federal Reserve Chairman Jerome Powell said Friday that the central bank will keep interest rates low for a long time in order to ensure greater spending and lower unemployment rates.
“We think that the economy’s going to need low interest rates, which support economic activity, for an extended period of time,” Powell said during an interview with NPR on Friday. “It will be measured in years.”
Powell also said that the speed of job growth has been faster than many had initially expected based on the August jobs report, which showed unemployment dropping to 8.4%. However, he added that it could take years before the United States economy fully recovers from the pandemic-induced recession.
Powell’s comments come a week after the Fed announced a major change in its strategy that would temporarily allow inflation to run above its target to make up for periods of below-target inflation.
By keeping interest rates low and allowing more flexibility with inflation, the Fed is taking a broader view of its mandate to pursue “maximum employment,” hoping for lower unemployment and underemployment as long as inflation doesn’t result.
“Many find it counterintuitive that the Fed would want to push up inflation,” Powell said last week. “However, inflation that is persistently too low can pose serious risks to the economy.”
