Fed Chair Powell: "Longer-run level of the policy rate have risen"

From Fed Chair Powell: Opening Remarks. Excerpts: The economic environment has changed significantly since 2020, and our review will reflect our assessment of those changes. Longer-term interest rates are a good deal higher now, driven largely by real rates given the stability of longer-term inflation expectations. Many estimates of the longer-run level of the policy rate have risen, including those in the Summary of Economic Projections. 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.All rates will likely be higher this decade (barring an economic downturn) than in the 2010s.

May 15, 2025 - 18:22

From Fed Chair Powell: Opening Remarks. Excerpts:

The economic environment has changed significantly since 2020, and our review will reflect our assessment of those changes. Longer-term interest rates are a good deal higher now, driven largely by real rates given the stability of longer-term inflation expectations. Many estimates of the longer-run level of the policy rate have risen, including those in the Summary of Economic Projections.

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.

All rates will likely be higher this decade (barring an economic downturn) than in the 2010s.