Federal Reserve Chairman Jerome Powell said that the repercussions of inflation are expected to continue into the latter half of 2022, but stressed that the price hike will stop once the current pressures on the supply chain are over.
In a press conference on Wednesday, Mr. Powell emphasized that the supply chain crisis is the main reason for the highest inflation rate the country has seen in 30 years. He added that there are other secondary factors, including the shortage caused by the closure due to the Corona pandemic, the high rate of consumer demand, while he ruled out the impact of the wage crisis.
He pointed out that the new year will bring with it many good news, including the receding of the epidemic, the elimination of supply chain bottlenecks and the return of job growth again. He stressed that as a result, the inflation rate will drop from the high levels it is currently recording.
He said, "The economic activity continues to recover strongly, supported by the widespread increase in vaccinations, and the "delta" variable has negatively affected the economic recovery during the last period."
According to the Federal Reserve, inflation recorded its highest rate since May 1991, when the so-called core PCE price index jumped to 4.4%, outpacing the moderate rate of 2%. However, the US central bank did not back down from its position that inflation is likely to be "temporary" and is expected to subside next year.
His comments came after a vote by the Federal µµµµµµOpen Market Committee and the US central bank's announcement of a monthly cut of $15 billion in its $120 billion in purchases of Treasury securities and mortgage-backed securities.
According to Fox Business, the monthly asset purchases, known as quantitative easing, were aimed at stabilizing financial markets and reducing credit during the pandemic. This decrease, which puts an end to the massive deficit in the US central bank's balance sheet of $8.6 trillion, will end by the end of June as the economy recovers from the fallout from Corona.
Investors were also closely watching the post-meeting statement for signs that central bankers may speed up interest rate hikes next year in order to cool rising inflation. Rates are expected to remain in the current range of 0% to 0.25% until “labor market conditions reach levels consistent with the Committee’s assessments of maximum employment opportunities,” the Fed said.
He stressed that the decision to reduce bond purchases did not imply any direct indication of interest rates, stressing that the time was not yet ripe for an increase in interest rates.
"We may achieve maximum employment by the middle of next year," he added, even though some 7.7 million Americans are currently unemployed.
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