Fed governor downplays inflation risks

A senior Federal Reserve official called on the U.S. central bank to “wait patiently” when implementing an ultra-loose monetary policy to eliminate inflation concerns, while emphasizing the improvement of “imbalances” in the labor market.

Fed Governor Lael Brainard’s comments on Tuesday indicated that even if growth picks up and consumer prices start to rise, the U.S. Central Bank is still not prepared to start discussing its withdrawal of support for the U.S. economy hit by the pandemic. first step. .

They also indicated that senior Fed officials believe that the employment report last Thursday was weak, adding to their concerns that the acceleration of the US recovery so far this year is still unbalanced and full of uncertainty.

“The prospects are bright, but risks still exist. We are still far from our goals. The latest employment report reminds us that the results achieved may run counter to forward-looking forecasts and emphasizes the value of patience.”

“Retain patients through a short surge [in inflation] Matters related to the reopening will help ensure that achieving our goals requires potential economic momentum. . . Will not be constrained by premature tightening of financial conditions. “

Monetary policymakers’ comments are made in the context of rising energy prices and increasing evidence of supply chain bottlenecks, as the global economy begins to rise from the coronavirus-related lockdown.

Investors are increasingly worried that this year’s consumer price increase may be more pronounced than currently expected, leading to a continuous increase in inflation, which may prompt the Fed to tighten monetary policy faster than officials expected.

Brainard tried to dispel these concerns on Tuesday, emphasizing that over time, production-related issues will be gradually resolved. As the vaccination campaign progresses, the “imbalance of supply and demand” in the face-to-face service industry will also be “in a few quarters.” has been solved. The pace of economic reopening continues.

She said: “In terms of supply chain congestion and other reopening frictions, this is temporary, and they are unlikely to generate sustained high inflation on their own.” “The continuous and substantial increase in the inflation rate requires not only wages or Prices will rise for a period of time after the reopening, and broad expectations are needed that they will continue to grow at a sustained higher rate.”

The April employment report showed that the U.S. economy added 266,000 jobs last month, which is far lower than the March rate of 770,000 jobs, but much lower than most economists expected.

“[The data] Remind us that although there are good reasons to expect that the number of jobs and the number of people who want to work will fully recover, they are unlikely to recover at the same rate. ”

Some economists, business groups, and Republican lawmakers pointed out that the enduring federal system Unemployment benefits As the key reason why labor demand seems to exceed the labor supply of workers, Brainard pointed out that “virus-related barriers” are the main reason why companies face challenges in hiring employees.

She pointed out that these include concerns about health and safety, gaps in parenting, and weaknesses in public transportation.

A former Obama administration official and Democrat Brainard said: “Although there are different factors affecting demand and supply that may lead to an imbalance in the rate of progress, we have every reason to expect a strong rebound in employment in the next few quarters.” “But today, In any case, employment is still far from our goal.”

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