Powell tells Fed he’s in no rush to tighten up and downplays risk of runaway inflation By Investing.com

© Reuters.

© Reuters.

By Yasin Ebrahim Investing.com – Federal Reserve Chairman Jerome Powell said the central bank would allow the labor market to heat up and inflation to move above its 2% target over time, reaffirming expectations from the market that the central bank is in no rush to raise rates. . Powell acknowledged the potential for stifled consumer demand driving inflation as the pandemic recedes, but downplayed the risk of runaway inflation, indicating that the recovery in post-pandemic inflation will likely be unique. “The real question is, how big will that effect be and will it be persistent … clearly, a one-time increase in prices is very large and highly unlikely to meet persistently high inflation,” Powell said. Inflation “would need to average 2% over time” to be anchored to the central bank’s target. The Fed chairman continued to emphasize that inflation will be a key factor in driving policy decisions, and indicated that the labor market would be allowed to function strongly, causing a tightening of monetary policy. He made his comments Thursday during a virtual event sponsored by the Bendheim Center for Finance in Princeton. “If the unemployment rate were well below our current estimates of the natural rate of unemployment, that would not be a reason to raise interest rates, unless we see worrying inflation or other imbalances that could threaten our achievement. mandate, “Powell said. . Powell’s remarks come just a day after Fed Vice Chairman Richard Clarida said the central bank won’t raise rates until inflation hits 2%.

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