US economy is at an ‘inflection point’ as risks remain, says Federal Reserve Chair Jerome Powell

The economy is at an “inflection point” and on the cusp of growing more quickly, Federal Reserve Chair Jerome Powell said in an interview broadcast Sunday night. But he warned that the crisis was not yet over.

In the interview, with “60 Minutes” on CBS, Powell said that the American economy “has brightened substantially” as more people are vaccinated and businesses reopen. But he cautioned that “there really are risks out there,” specifically coronavirus flare-ups, if Americans return to normal life too quickly.

“The principal risk to our economy right now really is that the disease would spread again more quickly,” he said. “And that’s troubling. It’s going to be smart if people can continue to socially distance and wear masks.”

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The Fed has held interest rates near zero since March 2020 and has been buying about $120 billion in government-backed bonds each month, policies meant to stoke spending by keeping borrowing cheap. Fed officials have been clear that they will continue to support the economy until it is closer to their goals of maximum employment and stable inflation — and that while the situation is improving, it is not there yet.

Powell reiterated that approach Sunday, saying that the central bank would “consider raising rates when the labour market recovery is essentially complete, and we’re back to maximum employment, and inflation is back to our 2 per cent goal and is on track to move above 2 er cent for some time.”

But he said it would “be a while until we get to that place.”

Powell on Sunday highlighted that while some workers were doing well, others had yet to get back to where they were before Covid-19 lockdowns, a phenomenon that will influence when the Fed reduces or removes policy support.

Powell also pointed to data that shows the burden is falling hardest on those least able to bear it: Lower-income service workers, who are heavily people of colour and women, have been hit hard by job losses.

While he expects those workers to get back to their jobs more quickly as the economy rebounds, the Fed needs to “stick with those people and support them as they try to get back to where they were in life, which was working,” he said, adding, “They were in jobs just a year ago.”