Powell says the Fed can raise rates very quickly to control inflation

Rising oil and gas prices and other hurdles related to the war in Ukraine could push up already accelerated prices, the spelling problem Consumer inflation expectations. Expectations will be self-fulfilling if shoppers and businesses anticipate year-on-year inflation and act accordingly.

“The risk of high inflation raising uncomfortable long-term expectations is increasing,” he said. Powell said.

Nevertheless, he noted that the job market is already very strong, which will help the economy withstand a period with a more restrictive policy.

“Due to a number of measures, the labor market is much tighter and significantly stronger than the very strong job market that existed just before the epidemic,” he said. Powell said. “Every month a registered number of people leave their jobs, usually to take another job with a higher salary.”

Federal Reserve officials hope that workers – those in short supply – will return to the job market in the coming months and years. Reduce the pressure on employers. If that happens, it will help lower inflation as wage growth is moderate.

“In a way, it’s a great labor market,” he said. Powell said – but it is not static. “It’s not a labor market balance, in fact demand is greater than supply,” he noted.

Predictors say employees are returning much slower than expected, either because they retired early or because epidemic problems such as lack of maintenance kept them at home. Similarly, supply chain problems, such as factory shutdowns and shipping snarls, are slow to heal due to repeated corona virus outbreaks.

“Supply-side healing is expected to come over time as the world finally comes to some new normalcy, but the timing and purpose of that relief is very uncertain,” Mr. Powell said. “In the meantime, when we formulate policy, we expect real progress on these issues and will not consider significant near-supply side relief.”

See also  Array

Dolman Joseph Smith Contributed report.

Leave a Reply

Your email address will not be published.