Powell: "Immediate Response If Inflation Deviates from Expected Path"

Acknowledging Rising Inflation but Drawing the Line at "No Tapering"
Reaffirming Stance on Maintaining Monetary Policy

[Image source=AP Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] Jerome Powell, Chairman of the U.S. Federal Reserve (Fed) (photo), drew a line by stating that although inflation will remain at a high level for a considerable period, it is still far from meeting the conditions for interest rate hikes and tapering (asset purchase reduction).

Chairman Powell appeared before the House Financial Services Committee on the 13th (local time) and forecasted, "Inflation has been higher than we expected and will persist a little longer than anticipated." He expects inflation to ease by the end of this year.

Powell stated that bottlenecks caused by COVID-19 and increased demand from the reopening of economic activities have led to price increases in certain goods and services, but he expects much of this to be resolved once the bottlenecks are cleared.

He said there will be no interest rate hikes due to temporary inflation increases. He argued, "We should not react to things that will disappear," reaffirming a strong stance to maintain the current monetary policy to support economic reopening. However, he added that if inflation deviates from the expected path, monetary policy will be immediately adjusted in response.

Powell’s remarks came amid ongoing inflation concerns following the release of the June Consumer Price Index (CPI) the day before, which rose 5.4% compared to a year ago. The June Producer Price Index released on the same day also increased by 7.3% year-over-year.

The Fed also acknowledged the spread of price increases. In the 'Beige Book' released that day, the Fed stated, "In some jurisdictions, companies expected to raise prices due to raw material and labor shortages."

Regarding the monthly $120 billion asset purchase tapering, Powell explained, "The employment and inflation target criteria have not yet been met," adding, "Fed officials expect progress to continue."

Supported by Powell’s remarks, U.S. Treasury yields, which had shocked global financial markets the day before, returned to their previous levels. The 10-year U.S. Treasury yield fell about 0.05 percentage points to 1.36% that day.

This content was produced with the assistance of AI translation services.