The U.S. jobs market remains weak, Jerome Powell, chair of the U.S. Federal Reserve, acknowledged in a webcast for Princeton University.
Also, inflation has barely begun to stir and remains far below the Fed’s 2-percent target rate, he noted.
Therefore, “now is not the time to be talking about exit” from the Fed’s policies of bond-buying and near-zero interest rates, he said, targeting rumors that the Fed could, or should, cut back on its bond purchases and other stimulus programs in the near future.
“The economy is far from our goals,” Powell said.
The Fed has been buying $80 billion in treasury securities and $40 billion in mortgage bonds each month since June and will continue to do so until the jobs market has made “substantial further progress,” the central bank has said.
“We’ll let the world know” when the Fed decides to throttle back its bond purchases, Powell said, and “we’ll do so well in advance of active consideration of beginning a gradual taper in asset purchases.”
Keep Them Low
As for raising interest rates when inflation moves higher, Powell said, “When the time comes to raise interest rates, we will certainly do that… and that time, by the way, is no time soon.”
Leaving the crowd on a high note, Powell declared, “We have to get through this very difficult period this winter… I’m optimistic about the economy over the next couple of years – I really am.”
TREND FORECAST: As we have long forecast, Powell admits we are going to enter a “very difficult period this winter.”
Under the Fed’s stated interest-rate policy adopted in 2020, the bank will not raise interest rates to cool an overheated jobs market unless there is a strong likelihood of inflation above the bank’s 2-percent target rate.
By flooding the markets with cheap money, the Fed’s policies are intended to spur borrowing, spending, and investment. We forecast these policies will also jumpstart inflation.
Should inflation move above the invented 2-percent range and economic conditions continue to deteriorate, we forecast the Fed will not raise rates. Moreover, as the “very difficult period this winter” takes a toll on the economy, the Fed may well drop interest rates into negative territory… which, in turn, will drive precious metals and bitcoin prices higher.
