Americans are not only worried about future inflation, but they also face declining purchasing power in real time. Meanwhile, on Thursday, Federal Reserve chairman Jerome Powell plans to address the Senate Banking Committee and discuss inflation. In the prepublished remarks of Powell’s speech, the Fed chairman noted that the recent spike in inflation may last longer than the central bank expected.
Fed Chair Jerome Powell: ‘Inflation Effects Have Been Larger and Longer-Lasting Than Anticipated’
If you were to read reports published by news outlets like CNN or Axios, it’s likely the reporter would say something like “maybe we can ignore inflation expectations.” While CNN admits inflation is there, reporters like Dana Peterson blame things like the Covid Delta variant, chip shortages, labor costs and the cost of renting. Similar to the opinions of politicians and Fed board members, CNN’s Peterson concludes that “inflationary pressure probably will be with us for a while longer.”
Jerome Powell’s speech on Thursday reflects a similar message as he explains to the Senate Banking Committee in his pre-published statements that rising inflation may persist a little longer. “Inflation is elevated and will likely remain so in coming months before moderating,” Powell’s remarks from Thursday’s upcoming testimony note. The central bank lead blames supply chain issues and further adds:
As the economy continues to reopen and spending rebounds, we are seeing upward pressure on prices, especially due to bottlenecks in some sectors. These effects have been larger and longer-lasting than anticipated, but they will abate, and as they do, inflation is expected to drop back toward our longer-run 2 percent goal.
Long-standing bull market predicts 10% market correction, Fed says it will ‘do all it can to support the economy’
At the same time, “longtime market bull” Phil Orlando said on Monday that a 10% correction could take place “in the next five weeks or so.” The Federated Hermes chief market strategist explains that there is a lot of uncertainty around “fiscal and monetary policies” right now. “We see how events develop and evolve here,” Orlando said in an interview on CNBC’s “Trading Nation” show. The market strategist went on to add:
On the monetary policy side, inflation has been running much hotter than the Fed and the administration has been prophesying. We believe that inflation is higher for a longer time. That’s going to result in the Federal Reserve changing monetary policy both in terms of their taper and their interest rate increases much more quickly than they originally told us.
The news follows recently released statements from the Fed last week and a few Fed board members being screened for their stock purchases in 2020. Fed chair Jerome Powell has also been criticized for owning bonds of the same type the U.S. central bank bought during the pandemic last year. Of course, Powell’s pre-published remarks in the Senate Banking Committee’s next testimony note that the central bank will always intervene until the U.S. economy has recovered.
“We at the Fed will do all we can to support the economy for as long as it takes to complete the recovery,” Powell’s pre-published commentary emphasized.
