Fed Chair Powell Signals Higher Interest Rates Ahead
Jerome Powell, the Federal Reserve Chair, has hinted that near-zero interest rates might not return. In a recent statement, he suggested that the U.S. economy faces new challenges.These include potential âsupply shocksâ that could keep rates elevated.
On May 15, Powell warned that inflation could become more unpredictable. He believes the economy might face more frequent supply disruptions. This could make it harder to manage inflation. In simpler terms, the Fed may need to keep rates higher for longer.
After the 2008 crisis,the Fed cut rates to near zero. This lasted seven years.Now, overnight lending rates are between 4.25% and 4.5%. Powell thinks future rates will stay higher. He explained that inflation might fluctuate more than before. This is a shift from the stable period of the 2010s. The Fed used low rates to boost growth then. but todayâs economy is different. Rates may need to stay up to handle these changes.
supply issues are a big concern. They can cause prices to swing wildly. Powell said, âWe may see more supply shocks. This will test central banks and economies.
Powell also touched on former President Trumpâs trade policies.He said these could lead to higher prices and slower growth. Despite Trumpâs pressure to cut rates, Powell remains cautious. Investors believe Trumpâs words wonât affect markets soon.
