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Powell says Fed ready to intervene if US inflation spirals out of control

Jay Powell, the chair of the Federal Reserve, said the US central bank was ready to intervene if inflation spiralled out of control, but stressed that he expected price increases to ease later in the year.

“Inflation has increased notably and will likely remain elevated in coming months before moderating,” Powell said in prepared remarks released ahead of a hearing at the House financial services committee on Wednesday.

He added that the Fed “would be prepared to adjust the stance of monetary policy as appropriate if we saw signs that the path of inflation or longer-term inflation expectations were moving materially and persistently beyond levels consistent with our goal”.

Powell’s comments came in the wake of data showing the US consumer price index rose 5.4 per cent in June compared with a year ago, which revived concerns that the US economy may be overheating.

The figures could raise pressure on the US central bank to more rapidly begin the process of slowing the large doses of monetary support it delivered to the economy during the pandemic, starting with a reduction of the $ 120bn in monthly asset purchases.

Although Powell noted the higher inflation figures and insisted the Fed would not be complacent about rising prices, he stuck to his view that the inflation surge was largely temporary, which is shared by many central bank officials.

“Inflation is being temporarily boosted by base effects, as the sharp pandemic-related price declines from last spring drop out of the 12-month calculation,” according to Powell’s remarks.

“In addition, strong demand in sectors where production bottlenecks or other supply constraints have limited production has led to especially rapid price increases for some goods and services, which should partially reverse as the effects of the bottlenecks unwind.

“Prices for services that were hard hit by the pandemic have also jumped in recent months as demand for these services has surged with the reopening of the economy,” he added.

During the hearing, Powell is likely to be pressed by Republican lawmakers to explain the Fed’s position on inflation. Republicans are increasingly criticising the White House and Democrats for fuelling rising inflation and higher living costs by way of the $ 1.9tn stimulus legislation passed in March.

Some are also accusing the Fed of being complacent in the face of higher prices, and calling for the rapid removal of monetary stimulus.

But many Fed officials are wary of moving too quickly to pull back their support for the economy. The US labour market is still far short of its pre-pandemic employment levels, and fallout from the coronavirus crisis on a global scale could still pose risks for the American economy.

US government debt extended its rally after Powell’s testimony was released, with the benchmark 10-year bond trading more than 0.4 percentage points lower on the day to 1.37 per cent.

Short-dated Treasuries, which are more sensitive to policy adjustments, also gained. Yields on the two-year note slipped nearly 0.02 percentage points to 0.23 per cent.

During its June meeting, the Fed launched a debate about the timing and conditions of trimming its asset purchases, but Powell suggested a decision was not imminent. The Federal Open Market Committee said it would need to see “substantial further progress” compared to last December on its full employment and price stability goals to move the move.

“While reaching the standard of ‘substantial further progress’ is still a ways off, participants expect that progress will continue,” the Fed chair said in his prepared remarks. “We will continue these discussions in coming meetings. As we have said, we will provide advance notice before announcing any decision to make changes to our purchases.”

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They won't give up! Desperate Argentina to beg UN to intervene in Falkland Islands row

The UK has always stood firm against the UN’s resolutions that propose a dialogue between the two countries. Despite this Argentine officials Felipe Solá and Daniel Filmus will be present their arguments this Thursday in New York. The officials will attempt to obtain support from the 29 members of the UN’s “Decolonization Committee”.

Daniel Filmus, Argentine Foreign Ministry official for the Secretary of the Malvinas, Antarctica and South Atlantic, told the news site Infobae: “We hope that many countries will intervene in the session expressing their support for our position.

“Representatives of international organisations such as CELAC, Mercosur, and the Group of 77 and others will speak.”

The Board of Directors of the United Nations Special Committee for Decolonization unanimously ratified its “support for the resumption of negotiations between Argentina and the United Kingdom to find a peaceful solution to the controversy of sovereignty over the Malvinas Islands.”

The resolution was released on February 11 of this year but ignored by the UK.

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“This is following the resumption of negotiations with the United Kingdom as a means to end the dispute.”

Last Monday, June 14, Mr Filmus responded to the self-determination question and said: “As the United Kingdom knows, self-determination only applies in the cases of peoples under colonial rule, but the current population of the Malvinas Islands has been implanted by the British government.”

Mr Filmus continued with a tweet and said: “The UN resolution 2065 and subsequent ones are clear in this regard.

“The only way to resolve the sovereignty dispute over the Malvinas and put an end to colonialism is to resume bilateral negotiations between Argentina and the United Kingdom.”

Various other multi-lateral forums also call for Argentina and the UK to hold talks over the future sovereignty of the islands.

These groups include, the Organisation of American States, OAS, Mercosur, the Group of 77 plus China, the Community of Latin American and Caribbean States, Celac, and the Ibero-American Summits.

Additional reporting by Maria Ortega.

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This post originally appeared on Daily Express :: World Feed