[ad_1]
Mr. Powell conveyed a generally optimistic tone about the economy Wednesday, saying that “economic activity and employment have continued to strengthen,” even as he noted the room for improvement in the labor market. He cited virus fears, caregiving needs, and unemployment insurance benefits as factors keeping people out of work, and reasons that the labor rebound “has a ways to go.”
Daily Business Briefing
While he acknowledged risks from the Delta variant, he suggested that the economic pullback might not be as severe as it was at the height of the pandemic. Still, he said, “it might weigh on the return to the labor market,” noting that the Fed will be monitoring that “carefully.”
The Fed is weighing conflicting economic signals as it tries to plan — and communicate — its next steps. The United States economy is roaring back after lockdowns last year and early this year, with strong consumer spending supported by repeated government stimulus checks. Inflation is taking off as economic activity rebounds from weak 2020 levels and as surging demand for washing machines, electronics, cars and housing outstrips what producers can supply.
Consumer prices picked up by 5.4 percent in June from the prior year, the quickest pace since 2008. The Fed’s preferred inflation gauge has been slightly more muted, at 3.9 percent in May, but that, too, is well above the central bank’s 2 percent average inflation goal.
“Inflation has increased notably” Mr. Powell said at the news conference, adding that it will likely remain elevated in coming months before moderating. But the Fed chair said that as supply bottlenecks abate, “inflation is expected to drop back toward our longer-run goal.”
He noted that inflation could turn out to be higher and more persistent than Fed officials expect, but for now inflation expectations — which are important to guiding actual price gains — seem consistent with the Fed’s goal, which is to average 2 percent annual inflation over time.
Officials expect the pop in prices to calm down as the economy gets back to normal. For now, they are more worried about a different set of risks: About 6.8 million jobs are still missing compared with February 2020 levels. Workers are taking time to sort back into suitable employment, and the central bank wants to make sure the economic recovery is robust as they try to do that.
[ad_2]
Source link