Federal Reserve Chairman Jerome Powell said the central bank has a ways to go yet before it gets interest rates to where they are neither restrictive nor accommodative.
In a question and answer session Wednesday with Judy Woodruff of PBS, Powell said the Fed no longer needs the policies that were in place that pulled the economy out of the financial crisis malaise.
“The really extremely accommodative low interest rates that we needed when the economy was quite weak, we don’t need those anymore. They’re not appropriate anymore,” Powell said.
“Interest rates are still acommodative, but we’re gradually moving to a place where they will be neutral,” he added. “We may go past neutral, but we’re a long way from neutral at this point, probably.”
The question of the neutral rate is critical for the Fed’s policymaking. Officials have been debating for years where that level may be, with the Fed consensus near 3 percent. The current range for the central bank’s benchmark rate is 2 percent to 2.25 percent; projections released last week indicated the policymaking Federal Open Market Committee is likely to take the funds rate to 3.4 percent before pausing.
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