Washington, Jan 11 (EFE).- The chairman of the United States Federal Reserve said Tuesday at a confirmation hearing for his second term that the fight against inflation is now the central bank’s top priority.
Jerome Powell, who was initially selected to lead the Fed in 2018 by then-President Donald Trump and in November was nominated by current head of state Joe Biden for a second term, is expected to win a new four-year term.
He told the Senate Banking Committee that the clear priority now is to keep consumer prices, which recently have risen to their highest levels in decades, in check.
“Price stability is half of our mandate. There’s no basis in the law for preferring maximum employment over price stability, or vice-versa. They’re equal. However, at different times one of them is farther away from its goal and that’s the one we need to focus on a little bit more,” Powell said.
“Sometimes that’s maximum employment, sometimes it’s inflation. I’d say now it’s inflation.”
Asked about Fed members’ forecasts that the central bank will raise its benchmark federal-funds rate at least three times in 2022, Powell said only that the monetary policy-making body will use all tools at its disposal to battle inflation.
Powell once again attributed current high inflation to a pandemic-triggered imbalance between supply and demand.
“There’s a mismatch between demand and supply. We have very strong demand in areas where supply is constrained, particularly around goods, particularly around things like cars,” he said.
The Fed chief predicted, however, that those imbalances will gradually shrink as global supply chain problems ease.
“If we see inflation persisting at high levels longer than expected, then … if we have to raise interest rates more over time we will,” Powell said.
He also reiterated that the US economy no longer needs all of the monetary stimulus programs put in place in response to the pandemic-triggered lockdowns of 2020.
“It is really time for us to move away from those emergency pandemic settings to a more normal level,” Powell said, though adding that “it’s a long road to normal from where we are.”
After the conclusion of its last meeting of 2021, the Federal Open Market Committee, the Fed’s monetary policy-making body, said it would accelerate the reduction of its monthly bond purchases – a key pillar of its Covid-19 economic stimulus strategy – and eliminate that program completely by March.
At that December meeting, the FOMC members voted to leave the Fed’s benchmark rate unchanged at a target range of between zero and 0.25 percent even though annual inflation in November rose to 6.8 percent, the highest level in nearly 40 years.
The Bureau of Labor Statistics on Wednesday will publish December 2021 inflation data, which could have implications for the Fed’s future decisions. EFE