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Most of Powell’s speeches explain why he thinks the current high inflation may pass.
Fed Chairman Jerome Powell said on Friday that the U.S. economy continues to make progress towards the Fed’s benchmark for reducing its emergency plan during the pandemic. His remarks defended the view that current high inflation may pass, and did not imply any time policy change.
In his speech prepared for the Jackson Hole Economic Conference speech, Powell hinted that the U.S. central bank will remain patient as it tries to restore the economy to full employment, and reiterated his desire to avoid chasing “temporary” inflation and may hinder employment growth. In this process-the defense of the new method of Fed policy that he introduced a year ago.
Regarding the Fed’s possible decision to start reducing its $120 billion in asset purchases per month, Powell said that in the weeks since the Fed’s July policy meeting, “more progress has been made in repairing the job market,” adding nearly 1 million jobs. , And should continue to make progress.
But this also coincides with the “further spread of the Delta variable. We will carefully evaluate the incoming data and the changing risks,” Powell said. This shows that the Fed’s discussion on when to start reducing bond purchase plans is still unresolved and must now be discussed with The health and economic risks posed by the highly contagious strain of coronavirus are commensurate.
Fed officials have largely stated that they do not expect another health crisis to derail the recovery. But it forced the central bank itself to move its Jackson Hole seminar from a mountain resort in Wyoming to a virtual event for the second year in a row.
The expectation of continued employment growth depends in part on the reopening of schools, the easing of childcare restrictions, and the steady recovery of consumer spending on close contact activities-developments that may be affected by the worsening of the epidemic.
Fed officials “expect to continue to create strong job opportunities. We will learn more about the impact of the Delta variable,” Powell said in his speech.
“For now, I think the policy is ready; as always, we are ready to make adjustments.”
Most of Powell’s speeches are devoted to explaining why he believes the current high inflation may pass, and cited a range of factors, from supply chain bottlenecks that may be alleviated to globalization as a price anchor.
He said that although the current rate of price increases is “worrisome”, if the Fed takes any policy changes, especially the premature decision to raise the central bank’s benchmark overnight interest rate, it will also be destructive. From the current level close to zero.
Powell said: “To achieve maximum employment, we have many places to cover, and time will tell whether we have reached a 2% inflation rate on a sustainable basis.”
“If the central bank tightens policy due to temporary factors… untimely policy actions will unnecessarily slow down recruitment and other economic activities, and drive inflation below expectations. Today, there is still a lot of idleness in the labor market and the pandemic continues, so The error can be particularly harmful.”
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