Federal Reserve Chairman Jerome Powell reiterated on Wednesday that interest rates are likely to remain low for the foreseeable future.
Powell painted a bleak picture on the state of U.S. employment, saying continued aggressive policy support is needed to fix the myriad issues facing workers.
Addressing the issue will require a "patiently accommodative monetary policy that embraces the lessons of the past" regarding the benefits that low interest rates bring to the labour market, the central bank chief said in a speech given to the Economic Club of New York.
Even though the economy has reclaimed more than 12 million jobs since the early days of the pandemic, Powell said the U.S. is "a long way" from where it needs to be in terms of employment.
Powell also indicated that the pace of job creation has slowed considerably.
Though the unemployment rate has fallen from its 2020 high of 14.8% to 6.3%, non-farm payrolls rose by 49,000 in January after falling by 227,000 in December. More than 10 million American workers are still without jobs — 4.4 million higher than before the pandemic a year ago.
"Despite the surprising speed of recovery early on, we are still very far from a strong labour market whose benefits are broadly shared," Powell said.
To address the disparities, the Fed six months ago adjusted its approach to full employment to make it a "broad and inclusive" goal and said it will not start raising interest rates until that objective is met. Central to the approach is a willingness to allow inflation to run a bit hotter than the Fed’s standard 2% goal for price stability.
The Fed is keeping its benchmark short-term borrowing rate anchored near zero and continues to buy at least $120 billion of bonds each month. Powell added that mass vaccinations will help as well as fiscal programs such as the Paycheck Protection Program, which provides loans to businesses that retain workers.
