A sharp rise in US inflation, even as the labor market is recovering sharply, means the Federal Reserve should more quickly remove stimulus from the economy, a central bank official said on Friday.
The Fed this month began slowing the pace of bond purchases launched in the pandemic to provide liquidity to the economy, but has expressed caution over when it will hit 30-year highs in consumer prices. , even then it will increase interest rates.
“The rapid recovery in the labor market and deteriorating inflation data has pushed me in favor of a sharper reduction in 2022 and a more rapid removal of housing,” said Fed board member Christopher Waller.
As the world’s largest economy recovers sharply from the deepest recession on record, global supply constraints and shortages as well as labor constraints have pushed prices up.
The annual consumer price index rose 6.2 percent in October – its highest level in more than three decades and well ahead of the Fed’s two percent target.
Prices have risen “significantly this year,” Waller said, and “despite the highest wage gains in years, inflation this year has wiped out any real wage growth for the average worker.”
“High inflation is painful for Americans who have little choice but to make choices about the goods and services they buy for everyday life,” he said in a prepared speech.
His remarks were the strongest yet from a top central banker, as Fed Chairman Jerome Powell has repeatedly said inflation is higher than expected, but most of the factors driving it are fleeting.
But Waller said that “price pressures are no longer concentrated in certain categories, they have become widespread,” and it is “very worrying” that consumer surveys show the public is concerned the rate will remain above two percent.
The central bank slashed the benchmark lending rate to zero in March 2020 to help stave off a deepening economic crisis, and has said it will not raise rates until the economy is at maximum employment and inflation is at or above two levels. Be on track to stay up a bit. Percent.
Waller said the inflation criterion of two percent or more has been met, and the economy is “making great progress toward achieving the employment phase of our mandate.”
The Fed this month began reducing the pace of monthly purchases of Treasury securities and mortgage-backed bonds, but said it could cut more quickly.
This story has been published without modification in text from a wire agency feed.
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