Jerome Powell, chairman of the Federal Reserve, said during a press conference on Wednesday that inflation could be worse than what was originally expected and that the “generous unemployment benefits” contributed to people not working.
The Hill reported:
Powell spoke to reporters shortly after the Fed’s Federal Open Market Committee (FOMC) announced it would keep interest rates at a 0 to 0.25 percent baseline range and continue its monthly purchases of at least $80 billion in Treasury bonds and $40 billion in mortgage-backed securities, as widely expected. The FOMC did, however, note that “the economy has made progress” toward the Fed’s goals of maximum employment and inflation on track to be slightly higher than 2 percent annually.
While the U.S. remains more than 6.8 million jobs below its February 2020 peak, inflation has risen to an annual rate of more than 5 percent — well above the Fed’s target — largely due to supply disruptions and kinks related to the reopening of the economy.
“As the reopening continues, bottlenecks, hiring difficulties, and other constraints could continue to limit how quickly supply can adjust, raising the possibility that inflation could turn out to be higher and more persistent than we expected,” Powell said. “Our new framework for monetary policy emphasizes the importance of having well-anchored inflation expectations, both to foster price stability and to enhance our ability to promote our broad-based and inclusive maximum employment goal.”
Powell also reportedly noted that “generous unemployment benefits” were among the factors that kept Americans from going back to work.
Fed chair Powell includes "very generous jobless benefits" among factors that have held people back from going back to work.
— Alan Rappeport (@arappeport) July 28, 2021
The news comes as President Joe Biden faces mounting challenges to continue to advance his agenda as only “45% [of Americans] judge the economy to be in good shape, while 54% say it’s in poor shape,” The Associated Press reported. A Politico/Morning Consult poll found that 59% of registered voters blame the Biden administration for skyrocketing inflation.
Other highlights from Powell’s press conference include:
Powell says it is easy to imagine school districts delaying reopening until the Delta variant wave passes.
— Alan Rappeport (@arappeport) July 28, 2021
Powell: Transitory does not mean price increases will reverse.
— Sven Henrich (@NorthmanTrader) July 28, 2021
Powell just claimed #inflation moderately above 2% (meaning a cost of living that goes up instead of remains the same or goes down) is a good thing, but admitted that what we have now doesn't qualify as moderately above, so its definitely not good if it persists, which it will.
— Peter Schiff (@PeterSchiff) July 28, 2021
Powell just defined the word "transitory" in a way that may surprise many people. According to Powell "transitory" #inflation means that recent large price increases will stick, but that future price increases will revert back to 2% per year at some unknown point in the future.
— Peter Schiff (@PeterSchiff) July 28, 2021
Powell conveniently dodged answering the question about his willingness to raise interest rates to fight #inflation even if the labor market hadn't fully recovered. That's because stagflation has arrived, and the #Fed can't acknowledge that predicament without making it worse.
— Peter Schiff (@PeterSchiff) July 28, 2021
Powell claimed that if #inflation is significant, and materially above its 2% goal, that it would use its tools over time to guide inflation back down to its 2% goal. The time to attempt that has long since past, as the rate is already too far above 2% to return to that level.
— Peter Schiff (@PeterSchiff) July 28, 2021
New all-time lows in real 10-year yields. pic.twitter.com/ftPD8CnrSx
— Lisa Abramowicz (@lisaabramowicz1) July 28, 2021
This is a developing story; refresh the page for updates.