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SUMMARY-Powell Says Fed’s Monetary Policy Should Address Plausible Outcome Range



Federal Reserve Chairman Jerome Powell presents testimony before Senad Banking Commission, Capitol, Washington


© Reuters/Elizabeth Frantz
Federal Reserve Chairman Jerome Powell presents testimony before Senad Banking Commission, Capitol, Washington

By Jonnelle Marte and Lindsay Dunsmuir

NEW YORK, Dec 1 (Reuters) – With the United States economy growing strongly and imbalances between supply and demand set to persist in the near future, the Federal Reserve authorities must be prepared to respond to the The possibility of inflation not falling back in the second half of 2022 as expected, Fed Chairman Jerome Powell said Wednesday.

Powell, on his second day of testimony in Congress, said that monetary policy will need to adapt as authorities seek to get millions of Americans back to work while ensuring that the recent surge in inflation is not stopped. take root.

“Almost all forecasters expect inflation to decline significantly in the second half of next year,” Powell said at a hearing before the House Financial Services Commission. “The point is, we can’t act like we’re sure of that … We have to use our monetary policy to address the range of plausible outcomes, not just the most likely.”

Powell also said that the US economic recovery is stronger than that of other major economies, thanks in part to more robust fiscal support. Consumer spending spiked in October and first-time jobseekers are at a 52-year low, prompting economists to raise their GDP growth estimates for the fourth quarter.

However, consumer confidence fell to a nine-month low in November amid concerns about the rising cost of living and fatigue from the pandemic. The new omicron variant of COVID-19 is also creating more uncertainty for homes and businesses.

Powell said Fed officials are monitoring the evolution of the economic outlook and acknowledged that they could face “stress” as they pursue their dual mandate of achieving maximum employment and price stability.

“We have to balance those two goals when they are in tension, as they are now,” Powell said. “But I guarantee you that we will use our tools to make sure that this high inflation that we are experiencing does not take hold.”

Although wages in the country are increasing, particularly for low-income workers, the increases are not occurring at a rate that could lead to higher inflation, said the head of the US central bank.

“We have seen a significant increase in wages,” Powell said. “We don’t see them rising at a worrying rate that tends to lead to higher inflation, but that is something that we are watching very closely.”

On Tuesday, Powell told the Senate Banking Committee that Fed officials would debate at their Dec. 14-15 meeting whether they should finalize their bond-buying program a few months ahead of schedule.

Last month, the Fed began reducing its purchases of $ 120 billion monthly Treasuries and mortgage-backed securities at a rate that would have it on track to complete liquidation by mid-2022. The program was introduced early last year to help shore up the economy during the pandemic.

(Reporting by Jonnelle Marte and Lindsay Dunsmuir, Additional reporting by Ann Saphir and Lucia Mutikani, Edited in Spanish by Manuel Farías)

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