MNI BRIEF: Powell Sees Global Slack Holding Down Inflation

Federal Reserve Chair Jerome Powell said Thursday weak global demand could hold down inflation for a while, and domestic wage gains will also likely be tepid.

"Look around the world, the shortage of demand in lots of large advanced economy countries around the world, who began this crisis at deeply negative interest rates and have little policy space with interest rates," Powell said. "Now there are other things they can do and they are doing but that all is going to hang around for a while. The U.S. economy is strongly integrated with the rest of the world, that's going to matter."

In the U.S., Powell said any near term burst in spending as the pandemic lifts could be a one-time boost to prices, made larger by weak base effects from last year. "We're a long way from maximum employment and there's plenty of slack in the labor market; unlikely that wage pressures are going to be reaching a level that would support higher inflation."