Powell says long-term rates to stay high amid frequent supply shocks
By Frank Prenesti
Date: Thursday 15 May 2025
(Sharecast News) - US interest rates are more likely to be higher over the longer term as the global economy faces more frequent and persistent supply shocks, Federal Reserve Chair Jerome Powell said on Thursday.
In a speech on the Fed's first policy framework review since mid-2020, Powell said the economic environment "has changed significantly" since then and the central bank's stance would "reflect our assessment of those changes".
Following the Covid pandemic central banks around the world forecast that inflation would "subside fairly quickly in 2022", when this did not happen the Fed hiked rates by 525 basis points over 16 months, he added.
"Higher real rates may also reflect the possibility that inflation could be more volatile going forward than in the inter-crisis period of the 2010s. We may be entering a period of more frequent, and potentially more persistent, supply shocks - a difficult challenge for the economy and for central banks," Powell said.
"We are paying particular attention to the 2020 changes as we consider discrete but important updates reflecting what we have learned about the economy, and the way those changes were interpreted by the public."
Reporting by Frank Prenesti for Sharecast.com
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