Powell is not giving the all-clear for inflation and material shortages for the time being

Jerome Powell

The US Federal Reserve chairman expects inflation to remain above the Federal Reserve’s target of two percent in the next few months before it subsides.

(Photo: Reuters)

Frankfurt According to US Federal Reserve Chairman Jerome Powell, high inflation and material shortages will affect the economy longer than expected. It is frustrating to see that the supply chain problems are not improving, Powell said on Wednesday at a round table moderated by Reuters editor-in-chief Alessandra Galloni at the ECB’s central bank forum: “At the moment they seem to be getting a little worse,” Powell told per Video switch.

The problem related to the opening of the economy after the crisis will probably drag on into next year and will also keep inflation higher than expected for longer.

As in many other regions of the world, the rate of inflation in the USA has recently risen sharply – among other things as a result of the corona crisis. Goods and services cost 5.3 percent more in August than in the same month of the previous year.

He expects inflation to continue above the Federal Reserve’s two percent target for the next several months before subsiding, Powell said. The Fed assumes, however, that the inflation surge will not result in a permanently increased price level. But it is difficult to say how long the phase of increased prices will last.

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ECB boss Christine Lagarde also emphasized that it was difficult to predict when the delivery bottlenecks would end. Acute problems in the procurement of preliminary products and raw materials are also affecting German industry: The material shortage worsened in September and is now greater than ever before, as the Ifo Institute announced.

As a result, more and more companies want to raise their prices. Consumer prices in Germany have already risen rapidly: Experts expect the data for September due on Thursday to rise to 4.2 percent. In August, the rate of inflation was 3.9 percent – the highest it has been in almost 28 years.

Japan is also suffering from supply chain problems

In the euro zone it was recently 3.0 percent – the highest level in ten years. Lagarde stressed that there was no reason to assume that the inflation spurt would not pass. In view of the currently increased energy costs, it is to be expected that this price-driving effect will subside in the course of the next year. The economy, which has been hard hit by the pandemic, will return to pre-crisis levels by the end of the year.

The Japanese central bank chief Haruhiko Kuroda, who was also involved in the ECB conference, expects the economy in his country to reach its pre-crisis level by the end of 2021 or beginning of 2022. Japan is also suffering from supply chain disruptions caused by the closure of factories in Southeast Asia. These obstacles should, however, dissolve in the coming months.

The head of the Bank of England, Andrew Bailey, expects the UK economy to reach pre-crisis levels in early 2022, “possibly a month or two” later than the central bank assumed in August.

When asked whether key interest rates could rise this year, Bailey was silent about the upcoming decision by the monetary authorities in November. He does not want to anticipate this. But key interest rates are the central bank’s “preferred tool” when it comes to transferring monetary policy impulses to the financial world and economy, he emphasized.

The monetary authorities in London are currently keeping the key interest rate at 0.1 percent and the volume of their current securities purchase program at £ 895 billion. An interest rate hike is expected on the financial markets by February 2022. The probability of a tightening by December is estimated at 60 percent.

More: Unrest in the capital markets: rising yields, falling stocks

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