WASHINGTON, Feb. 23 (Xinhua) -- U.S. Federal Reserve Chair Jerome Powell signaled on Tuesday that the central bank will continue its asset purchase program to support the pandemic-ravaged economy as the recovery "remains uneven and far from complete."
"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," Powell said at a virtual hearing before the Senate Banking Committee.
"We will continue to clearly communicate our assessment of progress toward our goals well in advance of any change in the pace of purchases," he said.
The Fed has pledged to hold its policy rate near zero and continue its asset purchase program at least at the current pace of 120 billion U.S. dollars per month until it sees "substantial further progress" in employment and inflation.
While ongoing vaccinations "offer hope for a return to more normal conditions" later this year, Powell noted that the path ahead is still highly uncertain.
"In particular, the high level of joblessness has been especially severe for lower-wage workers and for African Americans, Hispanics, and other minority groups. The economic dislocation has upended many lives and created great uncertainty about the future," he said.
Powell played down concerns of an inflationary outbreak as the Congress is moving ahead with President Joe Biden's 1.9-trillion-U.S.-dollar COVID-19 relief package.
"Inflation dynamics do change over time, but they don't change on a dime, and so we don't think how a burst of fiscal support or spending that doesn't last for many years would actually change those inflation dynamics," he said, adding economic and demographic forces have been pulling inflation down for a quarter of a century.
"We have been living in a world that for a quarter of a century where all of the pressures were disinflationary pushing downward on inflation, we have averaged less than 2 percent inflation for more than the last 25 years," said the Fed chief.
"Though GDP growth will boom over the next couple of years, Powell is laser-focused on the labor market, noting that the Fed looks at a broad range of metrics when evaluating maximum full employment," Ryan Sweet, a senior director at Moody's Analytics, wrote Tuesday in an analysis.
"Therefore, the unemployment rate could drop quickly but if the prime-age employment-to-population ratio remains below its pre-COVID-19 level, the Fed will be reluctant to raise interest rates," Sweet wrote, expecting the Fed not to raise rates until early 2023.
"Powell didn't waver in his very dovish policy stance. We can interpret his words as an attempt to discourage those who place aggressive bets in early liftoff or tapering," echoed Roberto Perli, a former Fed staffer and now head of global policy research at Cornerstone Macro, an independent research firm.
In its semi-annual Monetary Policy Report submitted to the Congress last week, the Fed warned that risks to the U.S. economic outlook remain substantial while vaccines offer hope of an end to the pandemic.
"The pace of vaccinations, the rate of decline in the spread of the virus, and the speed with which people return to normal activities all remain highly uncertain, particularly given the emergence of new, apparently more contagious strains," the Fed said, adding the economic outlook depends crucially on the course of the pandemic.
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