Powell: The US Federal Reserve won't allow high inflation
Federal Reserve Chairman Jerome Powell has dampened inflation worries and practically ruled out a rate hike in the near future. With the upswing, an increase in prices is to be expected, he said in an online event of the “Wall Street Journal” on the job market. But it will very likely remain with a one-off effect in the wake of a wave of consumption after the pandemic has subsided. He does not expect that inflation will solidify.
But the Fed will not make the same mistake as it did in the 1960s and 1970s when it reacted too late to building inflationary pressures. High inflation is a very bad situation. “The Fed will not allow that again,” stressed Powell on Thursday. Even if inflation is currently below the Fed's target, the central bank is aware of history.
In addition, the goal of full employment is not expected to be achieved this year. An interest rate hike should only be considered in an environment in which the economy has practically recovered from the corona crisis. “Realistically, that will take a long time.” The central bank will not raise interest rates in order to cool the economy down just because the number of employees is going up.
Powell had recently emphasized that the US economy would still be dependent on help from the monetary authorities for a long time in view of the virus crisis. The US Federal Reserve is currently helping the US economy with, among other things, very low interest rates and monthly securities purchases totaling 120 billion dollars (99.60 billion euros). Powell now reiterated that there is still a long way to go to achieve the Fed's goals.
