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Jay Powell says the federal government is ready to intervene if US inflation goes out of control – News


Jay Powell, Federal ReserveHe said the US central bank was ready to intervene in the event of a runaway inflation, but stressed that it expects inflation to ease by the end of the year.

“Inflation has risen significantly and is likely to remain high before moderating in the coming months,” Powell told the House’s Financial Services Commission at a hearing Wednesday. ..

“If there are signs that the inflation path or long-term inflation expectations are substantially and persistently above levels consistent with our goals, the Fed will adjust its monetary policy stance appropriately. I’m ready. ”

Powell’s comment U.S. consumer price index has risen 5.4 percent in June compared to a year ago, which revived concerns that the US economy may be overheating.

This figure could put pressure on the U.S. central bank to start the process of delaying the large amount of financial support provided to the economy during a pandemic more quickly, starting with a $ 120 billion reduction in monthly asset purchases. ..

But Powell Pointing to rising inflation, the Fed argued that it would not be happy with rising prices, sticking to the view that inflation surges were primarily temporary and shared by many central bank officials. Did.

“Inflation has been temporarily boosted by the underlying effects as the pandemic-related sharp price decline since last spring deviated from the 12-month calculation,” Powell said.

“In addition, strong demand in sectors where production is constrained by production bottlenecks and other supply constraints has caused prices for some goods and services to rise particularly sharply. The impact of bottlenecks has been eliminated. Then it should be partially reversed.

“The prices of services that have been hit hard by the pandemic have also skyrocketed in recent months as demand for these services surged as the economy resumed,” he added.

At the hearing, the panel’s top Republicans put pressure on Powell and explained the Fed’s position. inflation.. Republicans are increasingly criticizing the White House and Democrats for contributing to rising inflation and rising living costs. $ 1.9 trillion stimulus It was handed over in March.

Some have also accused the Fed of being complacent in the face of rising prices and calling for the swift elimination of monetary stimulus.

Missouri Republican Ann Wagner said in one pointed-out criticism that families and businesses in her district did not feel inflation was “very temporary.”Powell, the price surge Goods / Services It led to a resumption of the economy, but the Fed “was very close to monitoring the situation.”

The Federal Reserve Board is wary of moving too fast to regain support U.S. economy.. The US labor market is still well below pre-pandemic employment levels, and withdrawal from the global coronavirus crisis could still pose a risk to the US economy.

At the June meeting, the Fed debate Regarding the timing and conditions for reducing asset purchases, Powell suggested that a decision was not imminent. The Federal Open Market Committee said it would need to see “significant further progress” on full employment and price stability targets compared to December last year to begin dialing back stimulus. ..

“We are still on the way to reaching the standard of’substantial further progress’, but participants expect progress to continue,” the Fed Chair said in a prepared statement. “We will continue these discussions at future meetings. As already mentioned, we will notify you in advance before announcing your decision to change your purchase.”

Powell also inflation Now well above the Fed’s average of 2% target, central banks have a better understanding of dynamics by the end of the year to assess policy. “The question is where will this leave us in six months or so when the inflation we expect goes down,” he said.

As Powell testified, US government debt expanded its recovery, with benchmark 10-year Treasury yields dropping 0.05 points to 1.36 percent on the day. Yields on ultra-long-term 30-year bonds fell by nearly 0.06 points to below 2%.

It also acquired sensitive short-term government bonds through policy adjustments. Yields on 2-year bonds fell almost 0.03 points to 0.23 percent. Meanwhile, US stocks rose in the afternoon trading. S & P 500 rose 0.1%.

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Jay Powell says the federal government is ready to intervene if US inflation goes out of control

Source link Jay Powell says the federal government is ready to intervene if US inflation goes out of control

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