Powell Cautious on Interest Rate Hikes, Emphasizes Broad Employment Recovery Including Low-Income Groups

[Photo by AP Yonhap News]

[Asia Economy Reporter Park Byung-hee] Jerome Powell, chairman of the U.S. central bank, the Federal Reserve (Fed), mentioned the imbalances in the labor market and stated that efforts will be made to achieve the broadest possible employment recovery. Powell’s reference to the incomplete recovery of the labor market is interpreted as a reiteration of the Fed’s cautious stance on raising the benchmark interest rate despite inflation risks.

According to the Associated Press on the 9th (local time), during a virtual meeting held on the theme of economic diversity and inclusion, Powell emphasized, "The Fed will strive to reduce unemployment across the broadest possible range of groups, including the poor."

He added, "When the Fed judges maximum employment, it does not look only at visible numbers such as the unemployment rate and job growth figures but examines various indicators," and "Monetary policy is not targeted at specific groups, but currently the Fed is paying attention to imbalances in the labor market."

This is interpreted to mean that although the labor market recovery has been clear recently, the unemployment rate among the poor remains severe. It reflects the Fed’s continued stance of being cautious about raising the benchmark interest rate to maintain employment stability despite inflation. The AP interpreted Powell’s remarks as explaining why the Fed hesitates to raise interest rates even though U.S. inflation has surged to a 30-year high.

Last week, at the Federal Open Market Committee (FOMC), Powell formalized tapering (reduction of asset purchases) while emphasizing patience regarding interest rate hikes. After the FOMC, Fed Vice Chairman Richard Clarida and James Bullard, president of the Federal Reserve Bank of St. Louis, emphasized raising interest rates due to inflation, but Powell has maintained a different stance.

Powell explained the employment improvement status by saying, "Wages are rising enough to be meaningful, especially wages for low-income groups are increasing significantly," and "People who have struggled for years are finding jobs, and racial disparities are also decreasing." However, Powell emphasized that low-income groups were the most affected by the COVID-19 pandemic and that the recovery reversing this trend has only just begun.

Powell pointed out that imbalances could be an obstacle to unlocking the potential of the U.S. economy. He continued, "The benefits of employment recovery must reach a broad range of groups, especially extending to low-income groups," and emphasized, "The economy becomes stronger when as many people as possible are employed."

This content was produced with the assistance of AI translation services.