The U.S. Federal Reserve will not tighten monetary policy, Fed chair Jerome Powell reiterated on 4 March at the Wall Street Journal Jobs Summit.
“We’re still a long way from our goals of maximum employment and inflation averaging 2 percent over time,” he said.
With the U.S. economy still about ten million jobs short of its pre-pandemic payroll, “it will take some time to get back to maximum employment,” he cautioned.
The Fed has held its overnight interbank rate near zero since March 2020 and has been buying about $120 billion a month in Treasury and mortgage-backed securities to hold long-term interest rates near that level.
Powell offered no indication that the Fed will seek to stem the continuing rise in bond yields, which caused stocks to fall and bond yields to rise further on the day.
Asked about the rise in rates, Powell said it was “something notable and had caught my attention” but offered no policy responses.
“I would be concerned about disorderly conditions in markets or a persistent tightening in financial conditions that threatens the achievement of our goals,” he added.
Treasury bond yields are rising on expectations of an economic recovery that could spark inflation, driving bond values down and yields up even more.
“The market was looking for some reassurance” from Powell about rates “and didn’t get it,” Krishna Guha, chief of global policy and central bank strategy at Evercore ISI, said to the Wall Street Journal.
The Fed does not “appear particularly concerned about the current level of yields, which is significantly higher than it was two weeks ago,” he noted.
TREND FORECAST: Should interest rates move higher, the housing boom will reverse and so, too, will equity markets… both of which will trend from boom to bust. Tracking the recent, modest increase, fixed rates for 30-year mortgages rose past 3 percent for the first time since July, lender Freddie Mac reported. The hike is reducing the number of mortgage applications now coming to lenders, the WSJ said.
