‘Disinflation has started, but there is a long way to go’
(New York = Yonhap Infomax) Reporter Jeong Seon-yeong = US Federal Reserve (Fed · Fed) Chairman Jerome Powell assessed the labor market as exceptionally strong than expected in response to the surge in the US employment index States in January.
Jerome Powell, Chairman of the Federal Reserve System (Fed). A screenshot of a live broadcast of the CNBC Economic Club event
At the same time, the deflation process has begun, but is expected to take some time, suggesting that interest rates may rise more than expected.
“The jobs market is exceptionally strong,” Fed Chairman Jerome Powell said in a talk at the Economic Club of Washington DC on the 7th (local time).
“The message we sent at the Federal Open Market Committee (FOMC) last Wednesday was that the deflationary process that lowers inflation has begun, but this process will take a considerable amount of time, it will not be smooth and it’ It will probably be uneven.” Powell said.
“Therefore we think it is appropriate to continue raising interest rates further,” he said.
Chairman Powell still saw that the level was not restrictive enough.
“If we get a stronger indicator than expected, we could raise interest rates higher than expected,” he said.
Although lower inflation means a slight slowdown in the jobs market, this cycle is different from others, Powell said.
A large part of this inflation was explained by the closing and reopening of the pandemic. In addition, the job market was at least at full employment.
“It is nice to see a strong labor market, but at the same time we are seeing wage growth falling while still being very high,” he said.
“The jobs market hasn’t slowed down yet, but we expect it to,” he said.
“The biggest challenge facing the Fed is getting inflation back to 2%,” said Powell, reiterating the need to keep interest rates high.
Inflation has fallen significantly this year and will be close to the 2% target by 2024, Powell said.
He noted that the deflation process had started as commodity inflation had started to fall.
Regarding inflation, he said, “Housing services do not show deflation, but it will appear in the second half of this year,” but “inflation in core services other than housing will take some time.”
“We need to keep interest rates at a limited level until the lack of inflation in the service appears,” he said.
On the other hand, regarding the shrinking of the balance sheet, Chairman Powell replied that it was around 8.4 trillion dollars.
Regarding the sale of mortgage-backed securities (MBS), he said, “It is true that you mentioned selling, but not that you are doing it, but that you may consider it.”
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