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Federal Retracts and Admits Inflation “Will Be Higher and Persistent”

Inflation could be higher and more persistent than expected as the US economy recovers from the impact of the coronavirus pandemic, said the Chairman of the Federal Reserve (Fed, Central Bank), Jerome Powell.

Miami World / diariolasamericas

Powell pointed out that inflation is well above the Fed’s 2% annual target, mainly due to different factors, including product supply bottlenecks, excess job vacancies, high trade deficits and low exports due to the drop in productivity and scarce raw materials with high prices.

But “while the reopening continues, other restrictions could continue to limit how quickly supply adjusts, and that increases the possibility that inflation will be higher and more persistent than we expected,” Powell said at a press conference at the end of the session. Two-day meeting of the Fed’s monetary policy committee.

Powell reiterated that he is confident that despite the fact that inflation could remain high for several more months, the increase in prices must be stopped, and repeated that the Central Bank is ready to act if necessary.

Prominent economists refute what the president of the Federal Reserve says that the prices they will slow down. Analysts believe that prices will stop their rise, but not for now. What could lower prices is an increase in interest rates together with the increase in exports, a decrease in the scarcity of raw materials and a fall in the trade deficit (which remains at very high figures above 70,000 million dollars a month) .

“If inflation expectations rise, we will use our tools to drive inflation back to 2%,” he said.

The Federal Reserve (Fed) maintained its ultra-low interest rates and the same monthly level of asset purchases, estimating that the sectors affected by the pandemic show “improvements”, but not a complete recovery.

In a statement published on Wednesday after the two-day meeting of its monetary committee, the US central bank maintained – as the market expected – its reference rates between 0 and 0.25% and the level of asset purchases at 120,000 million dollars a month.

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