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Federal Reserve Chairman Jerome Powell said that he is optimistic about the U.S. economy bouncing back as the COVID-19 vaccine rollout continues, but worries about the possibility of another surge in virus cases.
“There really are risks out there,” Powell told CBS News in a 60 Minutes interview aired Sunday. “And the principal one just is that we will reopen too quickly, people will too quickly return to their old practices, and we'll see another spike in cases.”
Powell said he expects U.S. economic growth to be “very strong” through the second half of this year, adding that his “base case” forecast expects 1 million job gains for a “string of months.” The Bureau of Labor Statistics reported that the economy added 916,000 non-farm payrolls in March, the fastest pace of growth since August.
But Powell told CBS that there are still 8.5 million to 9 million people still out of work now compared to February of last year, noting that the Fed will continue to hold the line on its easy money policy until the economy appears to be at maximum employment.
The Fed has targeted short-term interest rates at near zero since the depths of the pandemic.
“I think it's highly unlikely we would raise rates anything like this year,” Powell said.
Still, the Fed chairman emphasized that social distancing and wearing masks will be key to avoiding another spike in cases.
“I would identify the principal risk to our economy right now really is that the disease would spread again more quickly,” Powell said.
Powell noted that the banking system appears to have held up well through the pandemic, noting that the risks of a 2008-like systemic breakdown appears “very, very low.”
The Fed chairman acknowledged the fallout from the implosion of the Archegos family office, which exposed several large international banks to billions in losses. Powell said the Fed is “monitoring” the event but said the incident appears to have been a risk management breakdown at one firm, as opposed to a system-wide issue.
“This incident doesn't really raise questions about the stability of the financial system or of those institutions, which are mostly foreign banks,” Powell said.
Broadly, Powell said asset prices do appear “elevated by some historical metrics” but said the financial system should prove resilient even if the stock market were to experience some big market correction.
Powell's remarks suggest that the Fed is not worried about holding the line longer on low rates and aggressive asset purchases, instead it is focused on bringing the labor market back to pre-pandemic health.
"I'm highly confident we'll come through this — with a better and more inclusive economy," Powell said.
The Fed’s next scheduled policy-setting meeting will take place April 27 and 28.
Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.