The US Central Bank (Fed) sees prices rise more than expected this year, but still believes it will be a temporary phenomenon only, brushing aside fears of a lasting rise in prices amid growing growth. yet is accelerating.
The officials of the Washington monetary institution did not take any immediate change in monetary policy, in the statement released Wednesday after two days of meeting.
The key rates remain in the range of 0 to 0.25% in which they were lowered in March 2020, to stimulate credit and therefore consumption. On the other hand, the members of the Monetary Committee are now counting on a first rate hike in 2023, and no longer 2024. As for asset purchases, which have allowed the markets to continue to function despite the crisis, they are maintained at their level. current of $ 120 billion per month.
The burning issue of asset purchases
Fed Chairman Jerome Powell is expected to give some indication of the Monetary Committee’s intentions for the future, including how it plans to reduce support for the economy. Starting with asset purchases, which are supposed to move first.
The issue of reducing asset purchases was first discussed at the last meeting at the end of April, with some officials considering that it should start discussing soon. Because the economy has largely begun to recover. Advances in vaccination have drastically reduced the spread of Covid-19 in the United States in recent months.
Growth forecast on the rise
In this context and thanks to “solid political support, economic activity and employment indicators have strengthened,” said the Fed in a press release. She adds that the sectors most affected by the pandemic, such as hotels and restaurants, “remain weak but have shown improvement”. The Fed is moreover more optimistic than before on growth, since it expects a gross domestic product up by 7.0% in 2021 against 6.5% estimated in March. His unemployment forecast for this year is unchanged. She still sees a return to full employment, that is to say to the pre-crisis level of 3.5%, the lowest in 50 years, in 2023.
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However, “the trajectory of the economy will depend significantly on the evolution of the virus,” she believes as in March. During a press conference, President Jerome Powell also pointed out that the economy was not yet fully recovered from the crisis. “Progress in vaccination will likely continue to reduce the effects of the public health crisis on the economy, but the risks to the economic outlook remain,” notes the Fed.
Transient inflation
But it is now inflation that worries. For the Fed, the rise in prices reflects “largely transitory factors”. Prices rose 5% year on year in May, their fastest pace in 13 years, according to the US Bureau of Statistics CPI index. A spectacular jump, certainly, but due in large part to the effect of comparison with prices which had fallen in spring 2020.
And many economists anticipate only temporary inflation, such as Treasury Secretary Janet Yellen who said on Wednesday that this “recent rise in inflation reflects the difficulties of reopening an economy that has been shut down, which has experienced huge fluctuations in spending habits and that faces bottlenecks “. “I do not expect this to be permanent,” she added, during a congressional hearing.
The Fed uses another measure of inflation, the Commerce Department’s PCE index, which in April experienced its strongest acceleration since 2007, + 3.6% year-on-year.
Before changing their policy, Fed officials want the country back to full employment. Progress remains to be made in particular on the employment front, 7.6 million jobs are still lacking.
(With AFP)
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