Wages aren’t rising enough to trigger higher inflation, says Powell

wages in USA are rising as the economy continues to recover from the impacts caused by the coronavirus pandemic, but the increases are not occurring at a pace that could trigger higher inflation, the president of the Coronavirus said on Wednesday (1). Federal Reserve, Jerome Powell.

“We saw wages going up significantly,” he said. Powell during a hearing before the Chamber’s Financial Services Committee.

“We don’t see them rising at a worrying rate that would tend to trigger higher inflation, but that’s something we’re watching very carefully.”

Powell also said the US economic recovery is stronger than that of other major economies, thanks in part to stronger fiscal support.

But with millions of Americans still unemployed, US central bank officials need to balance the mandate to achieve full employment and the target of price stability, Powell said.

“We have to balance these two goals when they are in tension, just as they are now,” Powell said. “But I assure you that we will use our tools to ensure that this high inflation that we are experiencing doesn’t get stronger.”

Stimulus cut

During the session, Powell said he did not believe that the reduction of the bond purchase program by the US central bank, in progress, would be disruptive to financial markets, and repeated the belief that it will be appropriate to accelerate the process of cutting stimulus.

“I think that the reduction in purchases doesn’t have to be a disruptive event in the markets, I don’t expect it to be. It hasn’t been until now. We wired that,” Powell said in response to a question at a congressional hearing.

“I think if you look at the state of the economy, look at where we are, look at the latest data, you can see the highly expansionary policy that we have even after the end of stimulus cuts, it’s really appropriate to cut back,” he said.

“And, as I mentioned yesterday, I believe it is appropriate to assess at the next meeting to reduce faster, so that (purchases) are closed a few months earlier.”