Wages in the United States (US) are rising as the economy continues to rebound from the blow taken by the pandemic, but the increases are not occurring at a rate that could lead to higher inflation, Federal Reserve Chairman Jerome said. Powell on his second day of appearing before legislators.
“We have seen a significant increase in wages,” he said. “We do not see them rising at a worrying rate that tends to cause higher inflation, but that is something we are watching very closely.”
Following the lifting of restrictions due to the pandemic and the economic reactivation, many companies in the US faced a worker shortage, for which they had to raise wages to attract staff. Officials have previously said that this is beneficial for people, but that it is a phenomenon that must be observed to avoid generating greater inflationary pressures.
However, with millions of Americans still out of work, central bank officials must balance their mandate to achieve maximum employment with their goal of price stability, Powell said at a hearing before the House Financial Services Commission.
“We have to balance those two goals when they are in tension,” he said. “But I guarantee you that we will use our tools to make sure that this high inflation that we are experiencing does not take hold.”
Employment vs inflation
Powell said that monetary policy will need to adapt as authorities seek to get millions of Americans back to work and, at the same time, seek to ensure explosive inflation does not take hold.
“Almost all specialists expect inflation to drop in the second half of next year,” he said.
“The point is that we cannot act as if we are sure of that. We have to use our monetary policy to address the range of plausible outcomes, not just the most probable. “
Powell said the Fed is monitoring the evolution of the economic outlook and acknowledged that they could face “stress” as they pursue their dual mandate of achieving maximum employment and price stability.
On Tuesday, Powell told the Senate Banking Committee that Fed officials would debate at their Dec. 14-15 meeting whether to finalize their bond-buying program a few months earlier than expected.
Last month, the Fed began reducing its purchases of Treasuries and mortgage-backed securities at a rate that would have it on track to complete the liquidation in June 2022.
Biden’s Package Could Influence: Yellen
For her part, the Secretary of the Treasury, Janet Yellen, acknowledged before the Financial Services Commission of the House of Representatives that the stimulus package for 1.9 trillion dollars that the president of the United States, Joe Biden, launched in March contributed to higher demand for products and services, but it is only a small factor in today’s higher inflation rates.
Yellen stated that the stimulus package clearly boosted demand, but felt that it was not a “fair assumption” to say that it fueled current spikes in inflation.
“It is true that the United States Rescue Plan put money in the pockets of the people and contributed to a strong demand in the American economy, but if you look at the amount of inflation we have, and its causes, that is at most a small factor, ”he said.
He insisted there was a “very good reason” to go ahead with the stimulus package to address a shortage in demand.
Reference-www.eleconomista.com.mx