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Powell says the US Fed is still far from changing policy and expects low inflation
US Federal Reserve Chairman Jerome Powell said the economy needs more improvement before the central bank changes its ultra-easy monetary policy.
In prepared remarks to the House Financial Services Committee, the central bank chief noted improvements but said the labor market in particular was still much lower than it was before the Covid-19 pandemic.
Powell noted that the Fed's benchmark of "more significant progress" toward full employment and price stability remains "a long way off". He noticed that Fed officials are at least talking about reducing the pace of asset purchases.
Regarding inflation, Powell said that it "has increased significantly and is likely to remain elevated in the coming months before declining." But he stuck to his belief, which he often declares, that the current increase is temporary and will be compensated with the return of conditions to normal.
Markets have been watching the Fed's calls for indications of when the Fed will begin reducing its $120 billion per month minimum in bond purchases as it keeps interest rates close to zero.
