Kathleen Bostjancic, an economist at Oxford Economics in New York, said the Fed’s heightened awareness of the advantages to society from a tight jobs market will help convince officials to keep interest rates low even as the economy recovers and unemployment falls.
“The recent protests likely highlight for the Fed the importance of trying to ensure a broader spread of economic gains, which means running the labor market hot,” she said in a note to clients.
Indeed, Powell pledged Wednesday that the Fed would do whatever it takes for as long as it takes to get the jobs market back to full health, even holding out the possibility that it would cap yields on Treasury securities – a strategy it last employed during World War II and its immediate aftermath.
Easy Money
“We’re not even thinking about thinking about raising rates,” he told reporters, after the Fed released forecasts showing that almost all officials expect to keep rates effectively at zero through 2022.
He also suggested that the Fed, Congress and the Trump administration might need to do more to help the economy recover from its steepest downturn in nearly a century.
Speaking on Capitol Hill on Wednesday, Treasury Secretary Steve Mnuchin said the U.S. needs additional fiscal stimulus -- particularly for businesses struggling to reopen from coronavirus-related closures -- even as he said the economy has started to recover.
Powell acknowledged that the jobs market may have bottomed out. But he seemed under no illusion that heralded a quick return to the super-healthy labor market that prevailed at the start of the year.
There could be “well into the millions of people who don’t get to go back to their old jobs” or to the industry they used to work in, he said. “It could be some years before we get back to those people finding jobs.”
This article was provided by Bloomberg News.