Federal Reserve Chairman Jerome Powell will speak at the Thomas Laubach Research Conference held by the Federal Presidents’ Committee on May 15, 2025 in Washington, DC.
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Federal Reserve Chairman Jerome Powell said Thursday that long-term interest rates are likely to be high as the economy changes and policies are in liquidity.
Powell, in his statement focusing on the Central Bank Policy Framework Review, last made, noting that the conditions have changed significantly over the past five years.
During the period, the Fed witnessed a period of surge in inflation, pushing for a historically aggressive increase in interest rates. Powell said that even if long-term inflation expectations are largely in line with the Fed’s 2% target, the era of near-zero rates will not return anytime soon.
“The high real-world fees have been prepared by the Thomas Laubach Research Council in Washington, D.C., and “inflation may reflect the possibility of greater volatility going forward than the intercrisis period of the 2010s.”
The Fed brought its benchmark borrowing rate to near zero for seven years in the seven years following the 2008 financial crisis. Since December 2024, overnight lending rates have been in the range of 4.25% to 4.5%, and have recently traded at 4.33%.
The “supply shock” statement is similar to what Powell has provided over the past few weeks. The policy change warns that the Fed can create a difficult balance between supporting employment and controlling inflation.
He didn’t mention President Donald Trump’s tariffs in his remarks Thursday, but the central bank chief recently notes the possibility that tariffs could slow growth and promote inflation. However, the extent of either effect is difficult to measure. Particularly because Trump recently supported a more aggressive obligation with a 90-day negotiation window pending.
Nevertheless, the Fed has been reluctant to ease its policy last year after cutting its benchmark rates at full points.
I’ll look back
As for the ongoing framework review, the Fed will seed to develop a five-year plan on how it guides decisions and how the movement is relayed to the public.
Powell said the process will examine many factors.
They include ways in which the Fed can communicate their expectations for the future, but also reflect on how the final review can be adjusted.
During the summer 2020 uprising, the Fed announced a “flexible average inflation target” approach that allows inflation to be slightly higher than normal, in order to provide full and comprehensive employment. However, inflation targeting quickly became a deadly issue as prices surged in the wake of the Covid pandemic, driving the Fed into a series of historically aggressive rate hikes.
The current review examines how the Fed considers “slows” in inflation and employment goals.
Powell and his colleagues initially dismissed the 2021 inflation surge as “temporary” due to factors specific to the pandemic. However, several Fed officials say the adoption of the 2020 framework doesn’t take into account the decision to hold interest rates near zero despite rising inflation.
“Previous discussions have shown that participants think it is appropriate to rethink the language of shortages,” he said. “And at last week’s meeting there was a similar view on average inflation targeting. We ensure that the new consensus statement is robust to a wide range of economic environments and development.”
Taking further into ideas of potential supply shocks and their impact on policies, Powell said the review will focus on communication.
“We generally see scholars and market participants. [Fed’s] “Effective communication always has room for improvement,” he said. As we move forward, we will look at ways to improve along that dimension. ”
Powell didn’t give a specific date on when the review would be completed, but said he was hoping for it in “the coming months.” In the previous review, Powell used his annual remarks at Jackson Hole, Wyoming to outline his policy.
