Is Inflation Transitory or Persistent Afterall?
FED chair Jerome Powell in a statement said he expects inflation to recede over the next year, however Omicron might lead to inflation lingering longer than expected
FED chair Jerome Powell in a statement said he expects inflation to recede over the next year, however Omicron might lead to inflation lingering longer than expected
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Federal Reserve Chair of U.S., Jerome Powell on Monday said inflation might subside over the next year as supply chair pressure has eased to some degree. However, he warned of being cautious of the Omicron strain to dampen outlook and prices might continue to rise longer than earlier expected.
“It is difficult to predict the persistence and effects of supply constraints, but it now appears that factors pushing inflation upward will linger well into next year,” Powell said in testimony prepared for delivery Tuesday at the U.S. Senate Banking Committee, and released Monday by the Fed.
His statement further added, the economy continues to recover strongly and thus the labor market is to improve pushing wages upward.
However, the recent spike COVID-19 cases and the emergence of the new Omicron variant “pose downside risks to employment and economic activity and increased uncertainty for inflation,” he said, noting that health-related concerns could “reduce people’s willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions.”
FED members continually voiced to speed up taper and hike rates earlier amid inflation being over the agency’s target of 2%.
The FED started tapering asset purchases which is likely to end by next June, thus gradually pulling back monetary support.