Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Powell Signals Fed in No Rush to Tighten, Downplays Risk of Runaway Inflation

Published 14/01/2021, 19:10
Updated 14/01/2021, 19:15
© Reuters.

© Reuters.

By Yasin Ebrahim

Investing.com – Federal Reserve Chairman Jerome Powell said the central bank would allow the labor market to run hot and inflation to move above its 2% target over time, reaffirming market expectations that the central bank is in no rush to raise rates.

Powell acknowledged the potential of pent-up consumer demand boosting inflation as the pandemic recedes, but downplayed the risk of runaway inflation, indicating the post-pandemic inflation pick up will likely be a one-off.

“The real question is, how large is that effect going to be and will it be persistent … clearly a one time increase in prices is very large is very unlikely to meet persistently high inflation,” Powell said. Inflation would “need to average 2% over time” to be anchored to the central bank’s target.

The Fed Chair continued to highlight that inflation will key driving policy decisions, and indicating that the labor market would be allow to run hot prompting tightening on monetary policy. He made his remarks Thursday during a virtual event sponsored by Princeton's Bendheim Center for Finance.

“If the rate of unemployment were to be well below our current estimates of the natural rate of unemployment that wouldn't be a reason to raise interest rates, unless we see troubling inflation or other imbalances that could threaten achievement out mandate,” Powell said.

Powell's remarks come just a day after Fed Vice Chairman Richard Clarida said the central bank won't raise rates until inflation reaches 2%.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.