US Federal Reserve (Fed) Chairman Jerome Powell stated that while the economy normalizes, a temporary increase in prices may be seen, but they do not expect permanent inflation.
Powell attended a video conference event on the global economy as part of the Spring Meetings organized by the International Monetary Fund (IMF) and the World Bank.
Pointing out that the substantial financial support and the rapidly advancing vaccination have allowed the economy to return to normal in a very short time, Powell said that the monetary policy is still supportive.
Powell stated that the recovery is incomplete and unstable, there will be a risk of mutation until everyone in the world is vaccinated and economic activity cannot be continued safely.
“WE WILL NOT GO BACK TO THE SAME ECONOMY”
Reiterating that asset purchases will continue at the current pace until a significant progress is achieved in the Fed’s targets, Powell noted that at this point, they talked about a real progress and did not look at the forecasts.
Powell called on people to vaccinate and continue social distancing measures, noting that global vaccination poses a risk to progress.
Fed Chairman Powell said, “We don’t want to have another epidemic. Even if it causes less economic damage and kills fewer people, it will slow the recovery.” said.
Underlining that the support needed will be provided to the economy until the recovery is complete, Powell said, “It is also useful to remind, we will not go back to the same economy, this will be a different economy.” found the assessment.
“THERE IS A DIFFERENCE BETWEEN PRICE INCREASE AND PERMANENT INFLATION”
Powell, who also made evaluations about inflation, stated that there is a difference between price increase and permanent inflation.
Stating that the level of inflation is determined by fundamental inflation dynamics in the economy, unlike supply bottlenecks, Powell said:
“As the economy normalizes again, there will be an increase in demand, perhaps there will be bottlenecks, but it is unlikely that this will change the underlying inflation psychology. We think that there will be an upward pressure on prices, it will be reflected on consumers in the form of price increases, and this effect will be temporary.”
Powell stated that they have the tools to intervene in the event of rising inflation, but they do not consider this possibility.
“In the most likely case, higher prices will be seen temporarily during this period, but no permanent inflation will be seen,” Fed Chairman Powell said. said.