Washington, July 15 (IANS) US Federal Reserve Chair Jerome Powell said that the country’s economy is “still a ways off” from the progress that the central bank wants to see before tapering asset purchases, while it was also monitoring inflation very carefully.
“At our June meeting, the (Federal Open Market) Committee discussed the economy’s progress toward our goals since we adopted our asset purchase guidance last December,” Powell said at a hearing on Wednesday before the House Financial Services Committee.
“While reaching the standard of ‘substantial further progress’ is still a ways off, participants expect that progress will continue. We will continue these discussions in coming meetings,” Powell said, adding the Fed will provide advance notice before announcing any decision to make changes to asset purchases.
The Fed has pledged to keep its benchmark interest rates unchanged at the record-low level of near zero, while continuing its asset purchase program at least at the current pace of $120 billion per month until the economic recovery makes “substantial further progress”, reports Xinhua news agency
Asked about what “substantial further progress” looks like, Powell said it was “very difficult to be precise” about the term as it was hard to measure the progress towards maximum employment, one part of the Fed’s congressional mandate.
“It really is a very broad range of things, including wages, unemployment, levels of employment, participation, all those things,” he said, adding Fed officials will “have another round of discussions on this very topic” at the Fed’s meeting in two weeks.
In its semi-annual monetary policy report submitted to Congress last week, the Fed said that the Covid-19 pandemic continues to weigh on the US economy and the labour market, reiterating the central bank will maintain its ultra-loose monetary policy to support the economy.
Powell also noted that the incoming inflation data “have been higher than expected and hoped for”.
“But they’re actually still consistent with what we’ve been talking about that the very high inflation readings are coming from a small group of goods and services that are directly tied to the reopening of the economy,” he said, adding the central bank is monitoring the situation very carefully.
“If we were to see that inflation remaining high and remaining materially higher above our target for a period of time and that it was threatening to uproot inflation expectations and create a risk of a longer period of inflation, then we would absolutely change our policy as appropriate.”
US consumer prices jumped 0.9 per cent in June, recording the largest one-month increase and largest 12-month increase in roughly 13 years, the Labour Department reported on Tuesday.
Over the last 12 months, the consumer price index soared 5.4 per cent, the largest 12-month increase since a 5.4 per cent increase for the period ending August 2008, according to the Department.
A Fed survey released on Wednesday showed that the US economy strengthened further over the past two months amid supply constraints and price pressures.
The survey also showed that prices increased at “an above-average pace” across the country, as seven Fed districts reported strong price growth and the rest saw moderate gains.
While some business contacts felt that pricing pressures were transitory, the majority expected “further increases” in input costs and selling prices in the coming months, according to the survey.