Jerome Powell, chairman of the Federal Reserve, said Tuesday that the central bank is increasingly worried about high – and stubborn – inflation and may accelerate its plan to end economic support as it tries to ensure that rapid price increases do not last long. -long.
His comments, made during a hearing at the Senate Banking Committee, came at a difficult economic time for the Fed. Prices for food, housing and other items are rising rapidly, millions of workers have yet to return to the labor market, and the virus continues to pose risks to the economic outlook, the latest of which is a new version of the omicron.
The Fed has been buying up $ 120 billion in government-backed securities every month for most of the pandemic to prop up the economy by keeping cash flows in financial markets. In November, officials announced plans to slow these purchases by $ 15 billion a month, leading to the program ending in mid-2022. But Powell made it clear on Tuesday that the central bank could complete the bond purchases faster by cutting back on the amount of economic juice the Fed will add in the coming months.
“The economy is very strong right now and inflationary pressures are great,” Powell said during a Senate Banking Committee hearing. “Therefore, in my opinion, it is appropriate to consider the completion of the process of buying our assets, which we actually announced at our November meeting, perhaps a few months earlier.”
Powell said he expects Fed officials to discuss accelerating the slowdown in bond purchases “at our upcoming meeting” scheduled for December 14-15.
The economy started to grow again this year, and hot demand faced limited supply, which led to a sharp rise in inflation. The central bank gradually refocused its stance on economic policy as price rises persisted, trying to prepare itself to respond if necessary. Now, the Fed appears to be turning more aggressively and more purposefully focusing on curbing rapid inflation.
“Typically, the higher prices we see are due to imbalances in supply and demand, which can be traced back directly to the pandemic and economic recovery, but this is also a case where price increases have spread much more widely in the past few months,” Powell said. on Tuesday. “I think the risk of higher inflation has increased.”