The labor market has recovered significantly in the past few months, explained Powell, and the inflation rate (currently 5.4 percent) has significantly exceeded its target of two percent. Like the majority of his colleagues on the Fed’s monetary policy-making body, he therefore believed that monetary policy stimuli should be gradually scaled back. However, because the latest surge in inflation is temporary, inflation expectations remain stable and a wage-price spiral is not discernible, a hasty reaction by monetary policy is not indicated.
In concrete terms, this means that Americans will have to wait a long time for higher key interest rates. First of all, the situation on the labor market must improve further and inflation should establish itself above the two percent mark for a long time, said Powell. He pointed out that people in the low-wage sector and ethnic minorities such as Hispanics and blacks in particular are still affected by increased unemployment. Their employment prospects need to be improved. Powell thus reaffirmed the Fed’s claim to use the printing press to pursue labor market policy.
–
