The current accommodative target range of the federal funds rate will stay where it is in order to bring back labor market conditions somewhere approaching employment levels before the pandemic erupted last spring, the chair of the Federal Reserve said Wednesday.
Federal Reserve Board Jerome H. (“Jay”) Powell said during a webinar sponsored by the New York Economic Club that the current federal funds target rate (of 0 – 0.25%) will remain in place “until labor market conditions have reached levels consistent with maximum employment and inflation has risen to 2% and is on track to moderately exceed 2% for some time.”
However, Powell also said the Fed plans to continue increasing its holdings of Treasury securities and agency mortgage-backed securities in an effort to bolster its plans. He said Treasury securities holdings will be increased by $80 billion per month, and agency mortgage-backed securities $40 billion each month, “until substantial further progress has been made toward our maximum-employment and price-stability goals.”
In other comments, Powell underscored the need to return employment to pre-pandemic levels, something he said he and the rest of the Fed’s board of governors are committed to achieving.
However, he indicated the challenge is daunting. “Given the number of people who have lost their jobs and the likelihood that some will struggle to find work in the post-pandemic economy, achieving and sustaining maximum employment will require more than supportive monetary policy,” he said.
“It will require a society-wide commitment, with contributions from across government and the private sector. The potential benefits of investing in our nation’s workforce are immense. Steady employment provides more than a regular paycheck. It also bestows a sense of purpose, improves mental health, increases lifespans, and benefits workers and their families.”