Even as economy heats up, Fed to stick with near-zero rates

Even as economy heats up, Fed to stick with near-zero rates

SeattlePI.com

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WASHINGTON (AP) — Hiring is accelerating as Americans increasingly venture out to shop, eat at restaurants and travel, and inflation pressures are even picking up after lying dormant for years. Yet this week, the Federal Reserve is all but sure to reiterate its commitment to ultra-low interest rates.

At a news conference Wednesday after the Fed's latest policy meeting ends, Chair Jerome Powell will likely underscore his view that the economy is far from fully recovered and needs the central bank’s continued support in the form of low borrowing costs. There are still 8 million fewer jobs than there were before the pandemic struck. And the unemployment rate, at 6%, though well below where it was a year ago, remains elevated.

Powell has stressed that further gains in the job market are needed to help the many Americans — especially low-income workers and people of color — who have been disproportionately hurt by the loss of jobs and incomes and have yet to benefit from the early stages of the recovery.

At the same time, the central bank this week could bring into sharper focus the significance of the gamble the Powell Fed is taking in its approach to inflation. Under a new framework the Fed adopted last summer, it will no longer raise rates in anticipation of high inflation, which had been its policy for decades.

Instead, Powell and other Fed officials have made clear they want to see inflation actually exceed their 2% annual inflation target — and not just briefly — before they'd consider raising rates. The Fed's policymakers have said they would like inflation to remain above 2% for “some time,” without specifying how long that might be.

They've set that goal so that inflation would average 2% over time, to offset the fact that inflation has been stuck below 2% for nearly the entire past decade. Fed...

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