Federal Reserve Chairman: price increases only short-term phenomenon to slow stimulus too early

Federal Reserve Board (Fed) Chairman Jerome Powell pointed out on April 28 that temporary price increases would not allow the Federal Reserve Board to withdraw stimulus measures poured into the U.S. economy during the Chinese Communist Viral Disease (COVID-19) outbreak.

After the Federal Open Market Committee (FOMC) ended its 2-day meeting, Powell said that while the world’s largest economy is on track from the depths of last year’s crisis, it is still far from recovery and it is too early to talk about slowing down stimulus measures.

He stressed the commitment of the Federal Reserve to maintain benchmark lending rates near zero, a policy that has been implemented so far at the start of the epidemic crisis. In addition, he also promised that the Federal Reserve will maintain a large-scale bond purchase program until employment rebound and inflation exceeds 2% “for a period of time”.

In response to questions from policymakers that inflation could get out of hand, Powell retorted: “We know what we’re doing. We’ll do what needs to be done.”

At the press conference, he again acknowledged that the inflation rate would climb in the coming months as business activity grew, but stressed that the main factors pushing up inflation would disappear.

Responding to a question from an AFP reporter, Powell said, “A one-time price increase under an economic restart is not the same as a sustained climb in the annual rate of increase in inflation and is unlikely to lead to a sustained high annual rate of increase in inflation.”

In the early months of the outbreak, prices plummeted as demand was hit by the blockade imposed by authorities to contain the spread of the virus. In recent weeks, prices of goods and services such as gasoline have continued to rise as travelers and commuters return to the roads and airports.

However, Powell said that the recent price increases, including a 2.6% annual increase in consumer prices in March, were mainly due to a rebound from the price decline relative to last year, and this situation will be eliminated in the short term.

He also admitted that one of the factors constituting inflationary pressure supply bottlenecks how to solve, “more difficult to predict”.