Fed Chairman Powell called inflation “disheartening” and believes it will continue into next year

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Federal Reserve Chairman Jerome Powell testifies at the Senate Banking, Housing and Urban Affairs Committee hearing on the CARES Act in the Hart Senate Office Building in Washington, DC, United States on September 28, 2021.

Kevin Deitch | Reuters

Federal Reserve Chairman Jerome Powell It is still expected that inflation will eventually ease, but said on Wednesday that he believes the current pressure will continue until 2022.

In assessing the current economic situation, the Fed chairman said in a panel discussion hosted by the European Central Bank that getting people to be vaccinated and preventing the spread of the Covid delta variant “still remains the most important economic policy we have”. He felt that “Depressed”. “

“It’s also frustrating to see bottlenecks and supply chain issues not getting better-in fact, profit margins have clearly gotten worse,” he added. “We think this situation may continue into next year and curb inflation for longer than we thought.”

The Fed’s preferred inflation measures are working At the hottest rate in about 30 yearsPowell and most of his colleagues said that as supply chain bottlenecks ease and demand returns to pre-pandemic levels, they expect current pressures to fall back to trend levels. He said on Wednesday that 2022 should be a “very strong year” for economic growth.

However, officials recently admitted that the current inflation situation has not eased as much as the Fed had imagined.Federal Open Market Committee Together to raise the forecast for core inflation in 2021 It fell to 3.7% from the 3% forecast in June.

Powell said: “The current surge in inflation is actually the result of supply constraints satisfying very strong demand, and all of this is related to the reopening of the economy. This is a process with a beginning, a middle, and an end.”

“We see these things are being resolved,” he added. “It’s hard to say how big or how long these effects will last during this period.”

Powell’s temporary and sustained expectations for inflation receive a response from the President of the European Central Bank Christina LagardeSitting on the panel with Powell, Andrew Bailey, Governor of the Bank of England, and Haruhiko Kuroda, Governor of the Bank of Japan.

“We monitor very carefully, but we certainly have no reason to believe that the price increases we are seeing now will largely not be temporary,” Lagarde said.

Powell said that if this is not the case, the Fed is ready to take action. Central bank officials have stated that They tend to start reducing their monthly asset purchases By the end of the year, although interest rates are not expected to increase until at least the end of 2022.

“Of course, if we see inflation continue to rise and become a serious problem, I will tell you that the FOMC will definitely respond, and we will use our tools to ensure that inflation runs at a level that meets our goals,” Powell said.

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