Fed Chair Powell Admits Mistake: The Era of Long-term Low Interest Rates is Over

Federal Reserve Chairman Powell stated on Thursday that the Fed is adjusting its overall policy-making framework to address significant changes in inflation and interest rate outlooks following the COVID-19 pandemic in 2020. Powell said, "The economic environment has changed significantly since 2020, and our review will reflect our assessment of these changes."
Nick Timiraos, a Wall Street Journal reporter known as the "Fed whisperer," pointed out that the Fed adopted the current framework five years ago and began reviewing it this year. This review is unlikely to affect the Fed's current way of setting interest rates. Powell hinted that the higher inflation-adjusted interest rates (i.e., "real rates") that emerged after the COVID-19 pandemic in 2020 might render some elements of the Fed's current framework no longer applicable. (Jin10)