Fed chair Jerome Powell: Still anchoring inflation expectations at 2%

Fed chair Jerome Powell: Still anchoring inflation expectations at 2%

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Federal Reserve Chairman Jerome Powell takes questions about the Fed's new monetary framework after a discussion at Princeton's Bendheim Center for Finance. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi

The Fed’s benchmark short-term borrowing rate is anchored near zero and it is continuing to buy at least $120 billion in bonds each month. Core inflation is running around 1.4%, well below the Fed’s 2% target.

“If inflation were to move up in ways that are unwelcome, we have the tools for that, and we will use them,” he said. “No one should doubt that.”

Powell noted that even though the economy faces powerful challenges and there is a long way to go until the labor market heals, there’s reason for optimism.

“We were in a good place in February of 2020, and we think we can get back there, I would say, much sooner than we had feared,” he said.

Powell spoke the same day that the Labor Department reported the fastest rise in jobless claims since August.

That release itself came the week after the department reported that nonfarm payrolls fell in December for the first time since April amid a crush on the leisure and hospitality sector due to Covid-related restrictions.

Despite those challenges, Powell said the economy faces a bright future in part because of the lack of contagion that happened during the financial crisis in 2008. There has been some concern expressed over the continuous surge in corporate debt as well as stretched stock market valuations, but the Fed chair said he’s not concerned about those issues.

“Every economy, and certainly our economy, faces plenty of longer-run challenges,” he said. “But I would say there were no obvious imbalances that threatened the ongoing expansion. You really can’t identify something that looked like if this blows up, the expansion.”

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