Temporary price jumps will not spook the Federal Reserve into pulling back on the stimulus it has pumped into the US economy during the Covid-19 pandemic, the central bank’s chair Jerome Powell said on Wednesday, April 28.
While the world’s largest economy is coming back from the depths of last year’s crisis, the recovery has a ways to go and it is too soon to even talk about easing off the gas, Powell said as the policy-setting Federal Open Market Committee (FOMC) concluded its two-day meeting.
He highlighted the Fed’s commitment to keep the benchmark lending rate near zero, where it has been since the start of the crisis, and to continue its massive bond buying programme until employment recovers and inflation exceeds the 2% threshold “for some time.” Responding that policymakers could let inflation get out of control, Powell snapped back: “We understand our job. We will do our job.”
Speaking at a press briefing, he again acknowledged that inflation will increase in the coming months as business ramps up, but he stressed that the main factors pushing it higher will dissipate.
“An episode of one-time price increases as the economy reopens is not the same thing as, and is not likely to lead to, persistently higher year-over-year inflation,” Powell said in response to a question from AFP. After falling sharply in the early months of the pandemic as demand tanked when the economy shut down to contain the virus, prices of many goods and services have spiked in recent weeks, including gasoline as travellers and commuters return to roads and airports.