US Rate Hike Unlikely In Next 2 Years Despite Inflation, Economic Growth - Fed Chair

WASHINGTON (Pakistan Point News / Sputnik - 18th March, 2021) The Federal Reserve has no plans to raise interest rates this year or next despite a promising 2021 growth seen for US jobs, inflation and the overall economy, Chairman Jerome Powell said at a press briefing.

The US jobless rate will likely continue declining from February's 6.2 percent while inflation expands 2.4 percent this year against an overall 6.5 percent GDP growth expected in an economy rebounding from a pandemic-stricken 2020, the Fed projected. But these still weren't enough to raise interest rates, Powell said Wednesday.

"With regard to interest rates, we continue to expect it will be appropriate to maintain the current zero to quarter percent until rates are consistent with the maximum employment and on track to moderately exceed 2 percent for some time," he told a media briefing. "I would note that a transitory rise in inflation above 2 percent, as seems likely to occur this year, would not meet this standard."

The Fed has kept rates at near-zero since the COVID-19 pandemic struck a year ago, saying a raise would be ideal when there was maximum employment � or when the jobless rate fell to 4.0 percent or lower.

The United States has, however, lost about 10 million jobs over the last year due to business lockdowns forced by the pandemic.

The economy itself shrank 3.5 percent in 2020, after registering a 2.2 percent growth in 2019.

Powell said he expected a dynamic overall picture for 2021 due to economic opportunities created by COVID-19 vaccinations.

"The supply side in the United States is very dynamic," he said. "People will start businesses, they will reopen restaurants and, you know, the airlines will be flying again. All of those things will happen. (That) will turn out (into) a one-time sort of bulge in prices, but it won't change inflation going forward."

To further invigorate the economy, the Fed announced earlier on Wednesday that it will continue buying at least $80 billion per month of US Treasuries and another $40 billion monthly of mortgage-backed securities to work until substantial progress is achieved toward "maximum employment and price stability goals."