The president of the Federal Reserve United States (Fed, central bank), Jerome powell, estimated Tuesday that the high inflation could last until the middle of the year and noted that the institution is ready to take action if it lasts.
If the inflationary push continues beyond mid-2022, “we will react accordingly,” Powell said during a Senate hearing, hinting that the Fed would not hesitate to raise interest rates more aggressively.
“The return to normality will take time,” he warned however, at a time when rates are close to zero.
“To ensure a sustainable expansion (ndlr: of the economy), we must have price stability,” Powell assured lawmakers during a hearing on his nomination for a second term at the helm of the central bank.
Consumer prices in the United States rose in November to a level unprecedented in almost 40 years, of 6.8% in 12 months.
That figure is a far cry from the Fed’s 2% target considered healthy for the economy. December data will be released on Wednesday.
Powell attributed most of the rise in inflation to a “mismatch” between supply and demand caused by disruptions in the supply chain. And he emphasized that recovering price stability is a priority for the Fed.
Powell also argued that ending exceptional monetary support to the US economy would not have a negative impact on the labor market, the other priority parameter for the Fed.
“It’s time we started to move from a pandemic emergency to a more normal level,” Powell said. “This really shouldn’t have a negative effect on the job market,” he added.
“The job market is recovering incredibly fast” from the crisis in which the Covid-19 pandemic engulfed it in the spring of 2020, he said.
In December, unemployment in the United States fell to 3.9%, returning to its pre-pandemic level (3.5%), he noted, although he acknowledged that returning to work for some people remains difficult despite the large number of job openings. .
