US Fed Chairman Powell on 'unique inflation'

US Fed Chairman Jerome Powell defended the stance to provide support to the US economy and called price developments “unique” in history.

 US Fed Chairman Powell on 'unique inflation'

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• The story: The Federal Reserve Chairman Jerome Powell defended the central bank’s stance to keep providing support to the US economy even as inflation ran high. He said that this was a shock going through the system associated with the reopening of the economy and it’s driven inflation well above 2 per cent, and the Fed was not comfortable with that.
• Unique in history: Powell called the price developments “unique” in history and said the central bank was watching closely to see whether its expectation that the high inflation will prove temporary is correct, or whether it threatens to be longer lasting.

1. Consumer prices soared in June '21 by the most since 2008 and were up 5.4 per cent from the same month last year.
2. Powell’s remarks before Congress come right before President Joe Biden decides whether to give him another four years at the Fed helm or pick someone else.

• Economic situation: The US economy is recovering strongly from the pandemic-driven swoon, with economists forecasting growth clocked in at a double-digit annualised pace in the second quarter.
• CBDC: Powell also said he had not made up his own mind on the merits or demerits of a central bank digital currency, but he would want authorisation from Congress before taking any action to create one. But the Fed would like to see broad-based support before taking that leap.
• Other central banks: Meanwhile, stimulus-induced inflation is forcing others to think of cutting back stimulus measures now, including the Bank of England (BoE). 

 

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