US Fed warns of 'widespread' inflationary pressures

Fed chairman Jerome Powell testifies before the House Financial Services Committee in Washington, on March 8, 2023. PHOTO: NYTIMES

WASHINGTON - The Federal Reserve warned on Wednesday that the United States still faces “widespread” inflationary pressures, a day after comments by Fed chairman Jerome Powell sent stocks tumbling.

Mr Powell had earlier warned that the central bank is prepared to increase the pace of interest rate hikes, and could raise rates higher than anticipated if necessary, sending jitters through markets.

On Wednesday, the Fed said in its “beige book” survey of US economic conditions that there was a modest to moderate rise in employment across most regional districts, while labour market conditions remained solid.

Overall economic activity increased slightly in the year to Feb 27, with six of the Fed’s 12 districts indicating a modest expansion in the pace of activity. The remaining six districts reported little or no change.

Several districts reported a rise in price inflation, with persistent inflationary pressures recorded in the New York Fed district and a “robust” rise in house rental costs in Kansas City Fed district.

Inflation remains stubbornly above the Fed’s long-term target of two per cent, despite an aggressive campaign of monetary tightening that has brought interest rates up to a level not seen since the global financial crisis.

On Tuesday, Mr Powell also told lawmakers at a Senate hearing that the labour market remains “extremely tight.”

More half a million new jobs were created in January, driving the unemployment rate to its lowest level since the 1960s. AFP

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