High inflation in the United States is the result of a combination of factors, some of which are beyond the government’s control, the president of the American central bank estimated on Thursday, while admitting that Joe Biden’s stimulus plan has contributed to the price spike.
Hearing before the House of Representatives, Jerome Powell agreed with a legislator who listed the exceptional events that contributed to inflation: problems in global supply chains linked to Covid-19, confinements in China, the war in Ukraine.
That’s quite a good description, he said while pointing out that inflation was largely demand-driven in the United States after the pandemic.
Our inflation is a consequence of very strong demand, partly driven by (…) what Congress has done to support activity (recovery plan, editor’s note), and partly driven by what we have done , namely bringing interest rates close to zero in March 2020, he also underlined.
Inflation in the United States is a level not seen in more than 40 years. The surge in prices has accelerated particularly in the energy sector since Russia invaded Ukraine at the end of February.
Prices at the pump have thus passed the 5 dollar mark per gallon, penalizing many American families.
Jerome Powell nevertheless said he was convinced that he could act to temper demand and underlined the unconditional commitment of Federal Reserve (Fed) officials to fight inflation.
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According to him, the rise in interest rates should moderate inflation without necessarily affecting wage growth or the strength of the labor market.
In addition, Mr. Powell believes that US growth should remain solid in the second half.
He also once again acknowledged that the Fed had underestimated the tenacity of inflation, which explains why the rate hike was late.