The Magazine for Asian Investors
Federal Reserve Chairman Jerome Powell will have to tell Congress that inflation will remain higher than expected for longer. This will probably make true what some investors have been saying for some time, that inflation is here to stay. How long longer means Powell continues to push on the labor market figures and post COVID recovery.
Nevertheless, the Fed Chairman sticks to his outgoing argument that prices will remain high due to the COVID recovery. Powell assumes that the reopening of supply bottlenecks arises, which makes consumer prices rise. The consumer confidence determined by the Conference Board falls to 109.3 after the index in the previous month still 115.2 had amounted.
However, if inflation gets out of control, the Fed will use its tools to get inflation back to a level that is consistent with the goals.
Experts now say that the Fed is trapped and the tools to catch inflation are running out. Powell now admits for the first time that inflation remains higher than expected for longer. But he sticks to his point that everything is just transitory. Should the Fed Chairman be wrong again, inflation could soon reach the levels seen in the 1970s.