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Powell Downplays Risk of Runaway Inflation Post-Pandemic

Economy Jan 14, 2021 01:15PM ET
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© Reuters.

By Yasin Ebrahim

Investing.com – Federal Reserve Chairman Jerome Powell said Thursday, 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 [post-pandemic rise in prices] is going to be and will it be persistent … clearly a one time increase in prices is very unlikely to meet persistently high inflation,” Powell said Thursday during a virtual event sponsored by Princeton's Bendheim Center for Finance.

Inflation would “need to average 2% over time” to be anchored to the central bank’s target, he added.

The Fed Chair said the labor market would be allowed to run hot, without prompting the need to rein in easing monetary policy measures, highlighting once again that inflation will continue to lead the central bank's policy decisions. 

“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 the achievement our 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%.

Powell Downplays Risk of Runaway Inflation Post-Pandemic
 

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Comments (21)
Jon Bal
Jon Bal Jan 14, 2021 6:19PM ET
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so what will the black swan be
Joel Schwartz
Joel Schwartz Jan 14, 2021 6:14PM ET
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RAISE RATES YOU (FULL RANGE OF) TOOL
Gamer Turtle
GamerTurtle Jan 14, 2021 6:13PM ET
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everyone following the path of japan, negative rate, staggering wage with long hour with unpaid OT, deflation, and constant printing. easy for japanese to issue at negative rate and buy US bonds with debt but whom do US buy from when it goes to negative.
Pray LittleBear
Pray LittleBear Jan 14, 2021 6:13PM ET
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China?
Bobster Bambino
Bobster Bambino Jan 14, 2021 6:10PM ET
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Raise rates punk. The vaccine is out
Rodolfo Barraco
Rodolfo Barraco Jan 14, 2021 5:51PM ET
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Inflation, the most pervasive and regresive tax. Everyone pays it, poors pay it the most, goberment needs it to pay for the paychecks
Sol Weinberg
Sol Weinberg Jan 14, 2021 5:17PM ET
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Of course he would. They worship at the altar of inflation. To them its never enough. Now they are convincing us that we need higher than 2% "price stability" lol
Horde NotTrade
Horde NotTrade Jan 14, 2021 4:55PM ET
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These Zio banksters hate the American people
Taylor Kaplan
Taylor Kaplan Jan 14, 2021 4:54PM ET
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Inflation is low because they dont count stocks in inflation calculations... if they did, numbers would be hyperinflationary. At some point, likely when we lose reserve status, people be forced to liquidate their stocks to chase goods and services.Thats when inflation will kick in.
amar ranjan
amar ranjan Jan 14, 2021 4:43PM ET
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Powell is fool, acted under Trump Pressure.
Chris Cash
ChrisCash Jan 14, 2021 4:43PM ET
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He is no longer under Trump
Alan Rice
Alan Rice Jan 14, 2021 2:40PM ET
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Censors on Investing.com ****
Henrik Lindberg
Henrik Jan 14, 2021 2:40PM ET
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They really need to tune that new auto comment admin service
 
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