September 28, 2023

Jay Powell says the central bank is ready to intervene if US inflation gets out of control

J. Powell, Chairman Federal Reserve, Said the US Federal Reserve was ready to intervene if inflation went out of control, but stressed that he expects inflation to ease later this year.

“Inflation has risen significantly and will continue to rise in the coming months before it is moderated,” Powell told the House of Representatives’ Financial Services Committee during a hearing on Wednesday.

He added that the central bank would be “ready to change the position of monetary policy if it sees signs that the path of inflation or long-term inflation expectations are moving materially and stubbornly beyond our targets”.

Powell’s comments came after the data was shown US consumer price index rises 5.4 percent in June compared to a year ago, which renewed concerns that the U.S. economy could heat up.

These figures could put pressure on the US Federal Reserve to begin the process of slowing down the large amount of monetary support provided to the economy during the epidemics, starting with a $ 120 billion cut in monthly asset purchases.

Although Powell Referring to the high inflation figures, he stressed that the central bank was not satisfied with the rising prices, confirming his view that the rise in inflation was mostly temporary, which is shared by many central bank officials.

“Inflation is temporarily boosted by fundamental effects because the last epidemic-related price since last spring has been off the 12-month calculation,” Powell said.

“In addition, production barriers or other supply barriers to strong demand in sectors with limited production have led to rapid price increases for some goods and services that need to be reversed somewhat when the effects of the disruption are eliminated.

“Prices for services that have been severely affected by the epidemic have also increased in recent months as demand for these services has increased as the economy reopens,” he said.

During the hearing, senior Republicans on the panel pressed Powell to explain the central bank’s position Swelling. Republicans criticize White House and Democrats for fueling rising inflation and rising living costs 9 1.9tn Trigger Act Passed in March.

Some have accused the federal government of being complacent in the face of rising prices and the need to quickly remove the cash incentive.

In a clear critique, Ann Wagner of the Missouri Republican House said families and businesses in her district did not feel inflation was “too temporary.” Powell responded that price increases were coming from a “small group” Goods and services The economy has been tied to reopening, but the central bank has been “monitoring the situation very closely”.

The central bank’s brown book report, which provides data on the economy gathered by the central bank’s regional colleagues, underscores the urgency behind the inflation debate.

Businesses described the “broad-based” price pressures, which were “severely” impacted by the hospitality industry “by the limited supply of goods and labor,” according to a report released during the congressional hearing.

“While some contacts feel that price pressures are temporary, the majority expect further increases in input costs and sales prices in the coming months,” the report noted.

However, federal officials are wary of moving too quickly to withdraw their support American economy. The U.S. labor market is much lower than its pre-epidemic employment levels, and the global exit from the corona virus crisis could pose even more risks to the U.S. economy.

During its June meeting, the central bank a Discussion It was about the timing and conditions of arranging its property purchases, but Powell suggested that a decision was not immediate. The Federal Open Market Committee said it should see “significant improvement” compared to its full employment and price stability goals compared to last December.

“Achieving the standard of substantial improvement is just one more way, and participants expect progress to continue,” the Central Chair said in its prepared comments. “We will continue these discussions in the coming meetings. As we said, we will give advance notice before making any decision to make changes to our purchases.”

Powell also suggested it Swelling Now that the Fed’s average is above the 2 percent target, central bankers will have a better picture of the variability by the end of the year to evaluate policy. “The question is, where will this leave us in six months or when inflation will fall as we expect,” he said.

As Powell testified, US government debt extended its rally, with yields on the 10-year Treasury note trade down more than 0.05 percentage points to 1.36 percent. The yield of the longest 30-year bond fell by almost the same amount and remained stable at less than 2 percent.

Short-term treasuries were also available that were more sensitive to policy changes. Yields on the two-year note fell nearly 0.03 points to 0.23 percent. Meanwhile, US stocks traded higher in afternoon trade. The S&P 500 is up 0.1 percent.

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