MNI POLICY: Powell Says Economy is Long Way From Fed Goals

Federal Reserve Chair Jay Powell on Tuesday pledged the Fed would continue its QE program for "some time" to support an economy a long way from maximum employment and 2% inflation, noting mixed signs of slowing momentum and progress on vaccinations.

"The economic recovery remains uneven and far from complete," he said in prepared testimony ahead of a semiannual hearing at the Senate Banking Committee.

"The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved. We will continue to clearly communicate our assessment of progress toward our goals well in advance of any change in the pace of purchases."

The pace of improvement in the labor market has slowed amid the winter surge in Covid cases and the pandemic has also "left a significant imprint on inflation," Powell noted. At the same time, "ongoing progress in vaccinations should help speed the return to normal activities," supporting an "improved outlook for later this year."

"As noted in our January policy statement, we expect that it will be appropriate to maintain the current accommodative target range of the federal funds rate until labor market conditions have reached levels consistent with the Committee's assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time," Powell said.

The Fed chief avoided wading into an ongoing debate over whether Joe Biden's USD1.9 trillion fiscal relief proposal is more than what's needed, making little mention of fiscal policy in his prepared remarks.