Fed chair Jerome Powell: One-time price increases not likely to lead to persistent inflation

The Federal Reserve on Wednesday kept its easy money policy in place despite an economy that it acknowledged is accelerating.

As expected, the U.S. central bank decided to keep short-term interest rates anchored near zero as it buys at least $120 billion of bonds each month. The latter part of policy is a two-pronged effort to support an economy that grew strongly to start 2021 as well as to support market functioning at a time when 30-year mortgages still go for around 3%.

Despite noting the economic strength as well as inflation that is on the rise, if just temporarily, the policymaking Federal Open Market Committee unanimously decided to make no changes in its approach and gave no indications that things will change anytime soon.

Fed Chairman Jerome Powell said the recovery is “uneven and far from complete.” While he noted that inflation pressures could rise in the coming months, these “one-time increases in prices are likely to only have transitory effects on inflation.”

Powell added that it’s still not time to talk about reducing policy accommodation, including the asset purchases.

“It will take some time before we see substantial further progress,” he said, repeating a phrase the FOMC has used repeatedly in its post-meeting statement.

Despite the dovish tone, stocks slid during Powell’s post-meeting news conference when he addressed the topic of financial stability. He noted that when some measure stability, “they look at some of the things that are going on in the equity markets, which I think do reflect froth.”

The post-meeting committee statement noted that efforts to combat the Covid-19 pandemic have helped boost the economy, though more needs to be done.

“Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened,” the committee said.

“The sectors most adversely affected by the pandemic remain weak but have shown improvement,” it added. “Inflation has risen, largely reflecting transitory factors. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.”

The committee again noted that economic progress is largely dependent on the course of the pandemic. Daily case counts have dropped significantly as the U.S. has been vaccinating close to 3 million people a day.

“The ongoing public health crisis continues to weigh on the economy, and risks to the economic outlook remain,” the statement said. At the March meeting, the same sentence included “employment” as an area where the crisis was having a negative impact, indicating that officials are noting improvement in the labor market.

Committee members unanimously agreed to stay put on policy.

In the statement, “the Fed offered no hints that it was considering slowing the pace of its asset purchases, let alone thinking about raising interest rates,” said Paul Ashworth, chief U.S. economist at Capital Economics.

The decision comes the day before the Commerce Department releases preliminary first-quarter GDP figures that are projected to show a gain of 6.5%. Most economists, including those at the Fed, expect the U.S. to turn in its best full year since at least 1984.

Inflation also has been on the uptick, with March consumer prices rising 2.6% for the fastest year-over-year increase since August 2018.

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[kamenhristov]

In short: "Temporary, temporary" and "It's different this time".

[hildafrankson]

Is there anyone who knows about this crypto currency trading and investment stuff? I need to get into it please.

[josephsloop]

How many times will he repeat this in the coming months?

March Inflation: "One time"
April Inflation: "Base effects"
May inflation: "Temporary"
June inflation: "Transitory"
July inflation: "Bottlenecks"
August inflation: "2% over the last 2 years"
September inflation: "2% over the last 5 years"
October inflation: "2% over the last 10 years"
November inflation: "Leveling off soon"
December inflation: "Money printer went brrrr!"

[incipidsigninsetup]

Lol, sure bud. More money printing to come but don't worry and definitely don't buy Bitcoin and Ethereum.

[richb]

I've been buying silver as a hedge for inflation. It's one of the only non-bubble assets out there.

[SingularitySenses]

Why is he still reading from a script? He's been telling the same lies now for weeks. You think he'd remember them by now.

[dustinjohnson]

Putting a 20 yr in 30k car when that car only wroth 15k is wrong . Messing up the economy home prices are over over vaule 30% increase.

[dustinjohnson]

Do your job for the banks and Wallstreet

[charlesbrightman]

Consider also, the US Fed has a target of 2% inflation every year. But that is also 2% on top of all the 2%'s that came before it, which turns out to be a lot of inflation over time.

Now first, if people's wages, benefits and even saving's account interest do not keep up with the true cost of inflation, they fall behind in buying power, and zero income is still zero income. But with economic inflation people would have a higher economic mountain to climb. They eventually could become economic slaves to the larger economy. And slavery was supposed to be done away with at least here in the USA. It seems it has been replaced by a system of 'economic slavery'.

Second, space travel, the ONLY thing that might save any species from this Earth, has gotten more expensive just in my lifetime. What is space travel going to cost in the next 100, 1000, 1 million years from now? Economic inflation just might be a contributing factor to the demise of all life from this planet Earth. And we did it to ourselves. Or more correctly the US Fed did it to us all, including themselves.

Instead of talk like doing away with the penny, they should actually be trying to bring back and maintain the value of the penny. And then have a target of 0% inflation annually. Otherwise, we all eventually die one day from something and go extinct, which is probably going to occur anyway, but without economic inflation, we would have a better chance of surviving. With economic inflation, less so.

What good is life if there is no entity left to live it? What good is money if there are no entities left to spend it?

Survive beyond this Earth, solar system and galaxy, OR die and go extinct. Those are the choices, (if we even actually have a choice). Currently, no exceptions.