Fed Chairman Jerome Powell said Thursday that long-term interest rates could be higher as economic changes and policy changes.

Powell noted that the focus is on the review of the central bank's policy framework, Powell noted that conditions have changed a lot in the past five years.

During this period, the Fed witnessed a surge in inflation, pushing it toward historically aggressive interest rate increases. Even if long-term inflation expectations are largely in line with the Fed’s 2% target, it is unlikely that the era of near-zero interest rates will return soon, Powell said.

"Inflation is more likely to be higher than the crime period in the 2010s than the crisis in the 2010s," Powell said in his preparatory notes at the Thomas Laubach Research Conference in Washington, D.C.

After the 2008 financial crisis, the Fed put its benchmark lending rate close to zero. Since December 2024, the overnight loan ratio ranges from 4.25% to 4.5%, with the latest transaction price being 4.33%.

The “supply shock” remarks are similar to those delivered by Powell in the past few weeks, warning that policy changes may put the Fed’s tough balance between supporting employment and controlling inflation.

Although he did not mention President Donald Trump's tariffs in his speech Thursday, central bank leaders in recent days pointed out that tariffs would slow growth and increase the likelihood of inflation. However, the extent of these two effects is difficult to measure, especially when Trump recently revoked the 90-day negotiation window, to withdraw from more aggressive responsibilities.

Still, the Fed was reluctant to relax policy after lowering its benchmark rate by a full percentage point last year.

As for the ongoing framework review, the Fed will sow seeds to develop a five-year plan to guide decisions and turn actions to the public.

Powell said this process will look at many factors.

They include the way the Fed communicates expectations for the future, while also needing a review of how it could adjust the last comment.

During the turbulent summer of 2020, the Fed announced a “flexible average inflation target” approach that would put inflation slightly higher than normal to provide full and inclusive employment. However, as prices surged after the Kuved pandemic, inflation targets quickly became a death issue, forcing the Fed into a series of historically aggressive rate hikes.

The current review will examine how the Fed considers “shorts” in its inflation and employment targets.

Powell and his colleagues initially dismissed the 2021 inflation rate due to pandemic-specific factors. But, even as inflation rises, adoption of the adoption framework in 2020 does not take into account their decision to bring interest rates close to zero.

“In the discussions so far, participants said they think it is appropriate to reconsider language around inadequacy,” he said. “At our meeting last week, we averaged a similar view on the inflation target. We will ensure that our new consensus statement is strong for the broad economic environment and scope of development.”

Powell said the idea of ​​further addressing the potential supply shock and its policy impact, and the review will focus on communication.

“Although academia and market participants generally believe that communications (Fed) are effective, there is always room for improvement,” he said. “In larger, more frequent, or more different shock periods, effective communication requires us to convey uncertainty about our understanding of the economy and prospects. We will look at ways to improve along that dimension as we move forward.”

Powell did not give a specific date, i.e. when the review was completed, but said he expected it to be reviewed in the "next months." In the previous comment, Powell used his annual speech in the Fed's Jackson Hole, a policy outlining Wyoming retreat.