The Federal Reserve looks likely to keep short-term interest rates near zero for five years or possibly more after it adopts a new strategy for carrying out monetary policy, Bloomberg News reported. The new approach, which could be unveiled as soon as next month, is likely to result in policy makers taking a more relaxed view toward inflation, even to the point of welcoming a modest, temporary rise above their 2 percent target to make up for past shortfalls. Fed Chairman Jerome Powell is slated to provide an update on the Fed’s 1-1/2-year-old framework review of its policies and practices when he speaks on Thursday to the central bank’s Jackson Hole conference, being held virtually this year because of the coronavirus pandemic. “I wouldn’t be surprised if interest rates are still zero five years from now,” said Jason Furman, a former chief White House economist and now Harvard University professor. At their June meeting, all 17 Fed policy makers projected that the federal funds rate they target would remain near zero this year and next. And all but two saw rates staying at that level in 2022. Officials will provide updated quarterly forecasts at their meeting next month, including for the first time projections for 2023.
