US economy on track for strong jobs market despite Delta, Fed Powell says – News


Much of Powell’s speech devoted to exposing why he thinks the current high inflation is likely to pass

The U.S. economy continues to move towards the Federal Reserve’s benchmarks for cutting emergency programs in the era of the pandemic, Fed Chairman Jerome Powell said on Friday in remarks defending the idea that the current high inflation would likely pass and did not signal the timing of any policy change.

In remarks prepared for a speech at the Jackson Hole economic conference, Powell signaled that the U.S. central bank will remain patient as it tries to bring the economy back to full employment, repeating that he wants to avoid chasing after the “transient” inflation and potentially discourage job growth. in the process – a defense indeed of the new approach to Fed policy that he introduced a year ago.

Regarding the Fed’s potentially imminent decision to start cutting its $ 120 billion in monthly asset purchases, Powell said the weeks since the Fed’s July policy meeting “have brought more progress “towards repairing the labor market, with nearly a million jobs added, and that progress must continue.

But it also coincided with “the further spread of the Delta variant. We will carefully assess the incoming data and the evolution of risks,” said Powell, noting that the Fed’s discussions on exactly when to start reducing the bond buying program remains on hold, and now must be faced with the health and economic risks posed by the highly contagious strain of coronavirus.

Fed officials have widely said they expect the resurgence of the health crisis will not derail the recovery. But that forced the central bank itself to move its Jackson Hole Symposium from a Wyoming hill station to a virtual event for the second year in a row.

Part of the expectation of continued employment growth is the reopening of schools, the easing of childcare constraints, and a steady return to consumer spending for close contact activities – developments that may be relevant. influenced by the worsening epidemic.

Fed officials “expect to see continued strong job creation. And we will learn more about the effects of the Delta variant,” Powell said in his remarks.

“For now, I think the policy is well positioned; as always, we are ready to adjust.”

Much of Powell’s speech was devoted to explaining why he thinks the current high inflation is likely to pass, citing a list of factors, supply chain bottlenecks that are likely to attenuate globalization acting as an anchor on prices.

While the current rapid pace of price increases is “a cause for concern” it would also be damaging, he said, if the Fed takes the plunge with any policy change and in particular with a premature decision to ” increase the central bank’s overnight benchmark interest rate. of the current level close to zero.

“We have a long way to go to achieve peak employment, and time will tell if we’ve hit 2% inflation on a sustainable basis,” Powell said.

“If a central bank tightens policy in response to factors that prove to be temporary… this untimely policy decision unnecessarily slows down hiring and other economic activity and pushes inflation lower than desired. and with the pandemic continuing, such a mistake could be particularly harmful. “


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