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Jay Powell, the president of the Federal Reserve, said the US central bank was willing to intervene if inflation went out of control, but stressed that it expected prices to rise by the end of the year.
“Inflation has risen markedly and is likely to remain high in the coming months before moderating,” Powell told the House financial services committee during a hearing on Wednesday.
He added that the Fed “would be prepared to adjust its monetary policy stance as appropriate if we saw signs that the inflation trajectory or long-term inflation expectations were moving materially and persistently beyond levels consistent with the our goal “.
Powell’s comments came from data showing the The US consumer price index rose 5.4% in June compared to a year ago, which revived concern that the US economy could overheat.
The figures could increase pressure on the US central bank to begin the process of slowing down large doses of monetary support it provided to the economy during the pandemic, starting with a $ 120 billion reduction in monthly asset purchases.
Although Powell He noted the higher inflation figures and insisted that the Fed would not be pleased with the rise in prices, but maintained his view that the rise in inflation was largely temporary, which is shared by many US officials. central banks.
“Inflation is rising temporarily due to base effects, as the strong price pandemic-related has been declining since last spring, the 12-month calculation was abandoned,” Powell said.
“In addition, strong demand in sectors where production bottlenecks or other supply restrictions have limited production has led to particularly rapid price increases for some goods and services, which should be partially reversed to as the effects of the bottlenecks unfold.
“Prices for services that were hard hit by the pandemic have also jumped in recent months, as demand for these services has increased with the reopening of the economy,” he added.
During the hearing, the group’s top Republicans pressured Powell to explain the Fed’s position inflation. Republicans are increasingly criticizing the White House and Democrats for fueling rising inflation and higher living costs due to the $ 1.9 million stimulus legislation approved in March.
Some have also accused the Fed of indulging in higher prices, and called for the rapid removal of monetary stimulus.
In a timely critique, Missouri Republican Ann Wagner said families and businesses in her district did not feel inflation was “very temporary.” Powell responded that the price hikes came from a “small group” of goods and services linked to the economic reopening, but the Fed “watched the situation very carefully.”
The Fed’s Beige Book report, which offers anecdotal evidence gathered by central bank regional counterparts on the economy, underscored the urgency of the inflation debate.
Companies described “general base” price pressures, with the most “acute” impact felt in a hospitality sector hampered by the “limited supply of materials and workers,” according to the report, published during the hearing in Congress.
“While some contacts considered price pressures to be transitory, most expected further increases in entry costs and selling prices in the coming months,” the report noted.
However, Fed officials are wary of moving too quickly to withdraw their support for the American economy. The U.S. labor market is still well below pre-pandemic employment levels, and the consequences of the global coronavirus crisis could still pose risks to the U.S. economy.
During the June meeting, the Fed released a debate about the timing and conditions of cutting asset purchases, but Powell suggested the decision was not imminent. The Federal Open Market Committee said it should see “substantial progress” compared to last December in its goals of full employment and price stability to start setting the stimulus.
“While reaching the standard of‘ substantial further progress ’is still a long way off, participants expect progress to continue,” the Fed chairwoman said in her prepared comments. “We will continue these discussions in the next meetings. As we have said, we will give prior notice before announcing any decision to make changes to our purchases. ”
Powell also suggested that while inflation it was now well above the Fed’s average target of 2%, central bankers would have a better picture of the dynamics at the end of the year to assess policy. “The question will be: where does this leave us in about six months when inflation, as we expect, goes down,” he said.
U.S. government debt widened its rise, according to Powell, with the yield on the 10-year Treasury note trading at more than 0.05 percentage points on the day, to 1.36 per cent. one hundred. The yield on the 30-year ultra-long bond fell by about the same magnitude to below 2%.
They also won the Treasuries with a short date, more sensitive to policy adjustments. Yields on the two-year note fell nearly 0.03 points, to 0.23%. Meanwhile, US equities gained gains in the afternoon trading. The S&P 500 rose 0.1 percent.
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