Fed’s Powell warns of high long -term rates as “show shocks” provide policy challenges

Federal Reserve Chairman Jerome Powell He said on Thursday that long -term interest rates are likely to be higher as the economy and politics change in flow.

In the notes that focused on reviewing the framework of the central bank’s policy, The last time in the summer of 2020Powell pointed out that the conditions have changed dramatically during the past five years.

During this period, the Federal Reserve witnessed a period of increased inflation, and prompted it to highly aggressive interest rates. Powell said that even with a long -term inflation expectations with the goal of the Fed Bank by 2 %, it is unlikely that the era of prices close to scratch will return any time soon.

Powell said in statements prepared for the Thomas Lubach Research Conference in Washington, DC.

The Federal Reserve has retained the standard borrowing rate near zero for seven years after the financial crisis in 2008. Since December 2024, the lending rate during the night ranged between 4.25 % -4.5 %, the last of which was 4.33 % trading.

Those similar notes to “supply shocks” He greeted Powell During the past few weeks, it warns that policy changes can place the federal reserve in a difficult budget law between supporting work and controlling inflation.

Although he did not mention President Donald Trump’s tariff In his remarks on Thursday, the Central Bank President indicated in recent days that the customs tariffs will regret and enhance inflation. However, it is difficult to measure the extent of the effect, especially since Trump has recently retracted the most aggressive duties awaiting the negotiation window for 90 days.

However, the Federal Reserve was reluctant to reduce policy after reducing its standard price by a full percentage last year.

Powell and his colleagues refused at first 2021 Increase inflation as “temporary” Because of the factors specified for the epidemic. However, many Federal Reserve officials said that the adoption of the 2020 framework was not passed in their decision to keep rates near scratch even with high inflation.

“In our discussions so far, the participants indicated that they believe it would be appropriate to reconsider the language about the shortage,” he said. “In our meeting last week, we had something similar to targeting inflation on average. We will ensure that our new statement in consensus is strong on a wide range of economic environments and developments.”

As well as addressing the idea of ​​the potential show shocks and the impact of its policy, Powell said the review will focus on communication.

“While academics and market participants generally view the Fed’s calls as effective, there is always a field of improvement,” he said. “In periods of larger and more frequent or more varied shocks, effective communication requires that we convey the uncertainty that surrounds our understanding of the economy and expectations. We will examine ways to improve this dimension while moving forward.”

Powell did not give a specific date at the time of the completion of the review, he only says he expected this in the “coming months”. As for the recent review, Powell used his annual statements in Jackson Hall and Wyoming, a decline to clarify policy.