The Fed’s Williams says inflation will top 2% for the rest of the year, but will decline after the economy recovers

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Do not panic about rising inflation in 2021. That is the message delivered Monday by the chairman of the New York Federal Reserve. John Williams, a top US central bank official, said he expects inflation to “exceed” the Fed’s 2% target for the rest of the year.

However, it also predicts that inflation will decline to 2% by 2022 after the economies of the United States and the world reopen for the most part and pent-up demand has largely been satisfied. Read: Powell Releases New Fed Data Showing How The Pandemic Hit The Poorest Hardest “It is important not to overreact to this price volatility resulting from the unique circumstances of the pandemic and instead stick with it. focused on underlying trends in inflation, “Williams said in a virtual address to the Annual Women in Housing and Finance Symposium. The cost of many key parts and materials has skyrocketed this year due to the rapidly strengthening US economy and persistent disruptions to global supply chains linked to the pandemic. Computer chips used in cars, home appliances, and a variety of other goods are particularly in short supply. Shortages and rising prices forced US producers to cut production in April despite high demand. As a result, inflation has recovered from almost zero last year to an annual rate of more than 2% in April. Read: ‘Crazy’ prices and rampant shortages frustrate manufacturers and threaten to slow economic recovery, ISM data shows top Fed officials insist they plan to stick with their easy money strategy to boost the economy , saying that any increase in inflation would only be temporary. The central bank has taken unprecedented steps to lower US interest rates to record lows. Williams said the Fed should continue to support the economy despite rising inflation because the United States is not yet close to a full recovery. He pointed out that 8.5 million jobs are still missing and that key segments of the economy are far from recovering. Read: Jobs are coming back as the economy accelerates and the coronavirus slows. He also said that a slow global recovery could further hamper the US “While I am optimistic that the economy is now heading in the right direction, we still have a long way to go to achieve a strong and full economic recovery,” he said. .