MNI POLICY: US Inflation Tame Even With New Fiscal Boost- IMF

U.S. inflation will remain modest and no worry to the Federal Reserve even with another USD1.9 trillion of fiscal relief, IMF chief economist Gita Gopinath said Friday.

"The evidence from the last four decades makes it unlikely, even with the proposed fiscal package, that the U.S. will experience a surge in price pressures that persistently pushes inflation well above the Fed's 2 percent target," Gopinath wrote in a blog post.

Even with another round of stimulus the Fed's preferred inflation measure would reach just 2.25% next year, "which is nothing to be concerned about and, indeed, would help underpin the achievement of the goals outlined in the Fed's policy framework."

The U.S. unemployment rate understates its weakness, and even with record low joblessness before the pandemic there was little inflation, Gopinath said. The global economy also has a lot of slack after a record 3.5% output decline last year.

Price pressures may also be held down as the pandemic benefits large companies with high profit margins that embrace more automation, the report said. Central banks have also done a good job anchoring price expectations, and could avoid damaging market swings with "early and clear communications of their intentions" as economies rebuild, Gopinath wrote.