U.S. Federal Reserve Chairman Colin Powell said Wednesday that the U.S. economy is facing higher inflation pressures than previously thought, but the factors driving up inflation are temporary and the central bank will not “pre-emptively” raise interest rates.
Powell said at a congressional hearing on the same day that inflation indicators in the United States have risen significantly recently, including the low base effect of the early COVID-19, higher oil prices, consumer spending as the economy restarted the rebound and supply bottlenecks. As these “temporary” factors recede, inflation is expected to fall back to the Fed’s 2 per cent long-term target.
Mr. Powell said the odds of hyperinflation in the U.S. economy were ‘very low,’ and that the Fed would not ‘preemptively’ raise interest rates because of concerns about possible high inflation. But he stressed that the current bout of inflation could prove more persistent than expected. If inflationary pressures continue to build, the Fed will use its policy tools if necessary to bring inflation back to its target.
He added that a slowdown in vaccination rates and the spread of new mutant strains would be risk factors for future U.S. economic growth.
U.S. consumer prices rose 5 percent in May from a year earlier on a seasonally adjusted basis, the biggest increase since August 2008, Labor Department data showed.
On June 16, the Federal Reserve announced to maintain the target range of the federal funds rate at zero to 0.25%, and maintain the monthly scale of asset purchases at least 120 billion dollars. The Fed also sharply raised its forecast for inflation this year to 3.4%.
Post time: Jun-24-2021