Powell: Fed Will Continue to Support Economy Until Recovery Is Complete

04/11/2021 | 05:16pm

By Paul Kiernan

Federal Reserve Chairman Jerome Powell said the U.S. economy appears to be at an inflection point, with output and job growth poised to accelerate in the months ahead as long as the Covid-19 pandemic retreats.

"We feel like we're at a place where the economy's about to start growing much more quickly and job creation coming much more quickly," Mr. Powell said in an interview to be broadcast Sunday evening on CBS's "60 Minutes." He said the Fed's forecast is that the economy could produce close to one million jobs a month for "a string of months."

The central-bank chief urged Americans to continue socially distancing and wearing masks, saying a resurgence of Covid-19 remains the primary risk to the economic outlook.

The U.S. seven-day average of newly reported Covid-19 cases has been climbing in recent weeks after a steady, monthslong decline following a deadly fall surge. Daily cases exceeded 75,000 on April 7, down from a peak of 300,000 in early January but higher than at any point in the first six months of the pandemic.

President Biden and administration officials have also urged Americans to be patient and take precautions as the rollout of Covid-19 vaccines continues and new variants spread.

Still, with the vaccination campaign picking up speed, Fed officials and private forecasters say the U.S. economy is positioned for its fastest year of growth since the early 1980s. Economists surveyed by The Wall Street Journal in recent days said they expect economic output to expand 6.4% in 2021 and private-sector payrolls to rise by 7.06 million.

Mr. Powell reiterated that the Fed plans to wait until the economy's recovery is complete before it raises interest rates.

"It'll be a while until we get to that place," Mr. Powell said, according to a transcript of the interview, which took place on Wednesday. Asked whether a rate increase might happen this year, Mr. Powell said it is "highly unlikely."

Mr. Powell and other Fed officials have indicated in recent weeks that they expect to hold U.S. short-term interest rates near zero through 2023. They also plan to continue the Fed's $120 billion of monthly bond purchases until the economy makes "substantial further progress" toward its goals of maximum employment and sustained, 2% inflation.

Inflation has remained below the Fed's target for most of the past decade, while the U.S. labor market remains about 8.4 million jobs short of its pre-pandemic level of employment.

Asked about Archegos Capital Management, an investment firm whose implosion in recent weeks caused billions of dollars in losses for banks, Mr. Powell said it didn't appear to raise questions about the broader stability of the financial system. But he indicated that the Fed might scrutinize whether banks adequately understand the risks they incur.

"It was a risk management breakdown -- and one that we're looking very carefully at to try to make sure it doesn't happen again," Mr. Powell said. "So that is surprising and concerning."

The Fed chairman also called for a reform of money-market mutual funds, which required a bailout from the central bank in March 2020 amid deep market turmoil. It was the second time in 12 years the Fed had to step in.

"There's a structural issue, and we know this," Mr. Powell said. "When something's happened twice, it really is time to go ahead and fix it. Every private business ought to have the ability to deal with a range of plausible things that might happen to it."

Write to Paul Kiernan at paul.kiernan@wsj.com

(END) Dow Jones Newswires

04-11-21 1916ET

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