US Fed chief vows to prevent inflation from becoming 'entrenched'
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US Fed chief Jerome Powell said the central bank would use tools to support the economy and a strong labour market and to prevent higher inflation from becoming entrenched.
PHOTO: AFP
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MCLEAN, VIRGINIA (BLOOMBERG) - Federal Reserve chairman Jerome Powell said the US central bank will prevent higher inflation from becoming entrenched, while cautioning that the post-pandemic economy might look different than the previous expansion.
"We will use our tools to support the economy and a strong labour market and to prevent higher inflation from becoming entrenched," Mr Powell said in a brief opening statement prepared for delivery at his confirmation hearing before the Senate Banking Committee.
"We can begin to see that the post-pandemic economy is likely to be different in some respects. The pursuit of our goals will need to take these differences into account," he said in the remarks, which were released on Monday (Jan 10) ahead of Tuesday's hearing.
Mr Powell was nominated by United States President Joe Biden to serve a second four-year term as head of the nation's central bank.
Governor Lael Brainard was picked to serve as vice-chairman and will go before the committee on Thursday. She succeeds Mr Richard Clarida, who said on Monday he will leave office on Friday. Mr Clarida's investment activities in 2020 - as the Fed was preparing to signal to markets that it was prepared to take action to buffer the economy from the coronavirus - have drawn scrutiny.
His departure will leave three remaining vacancies on the Fed board in Washington, and the White House is expected to soon announce a slate of candidates to fill those seats.
US central bankers, responding to the hottest inflation in a generation, are hurrying to end pandemic policy support while signalling they will raise interest rates sooner than expected. All officials in December indicated they backed raising rates from near zero this year, with a median estimate showing three hikes, compared with nine of 18 officials in September who sought no increase at all in 2022.
Policymakers worry that price pressures will take root in the US economy. They forecast strong labour markets even while the economy struggles with the Omicron variant, which could prolong the pandemic's disruption to the supply of goods, services and workers.
As Covid-19 spread in early 2020, Mr Powell rapidly cut rates to zero, launched quantitative easing and began rolling out the biggest financial safety net in US history to stem panic in markets and keep credit flowing to US companies.
In the midst of this, Mr Powell also launched a new policy framework that committed the Fed to not pre-emptively raise rates as unemployment fell, to allow the benefits of a tight labour market to reach minority communities that have missed out in the past.
US unemployment fell to 3.9 per cent in December, but the jobless rate for black Americans rose to 7.1 per cent.
