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Powell: Supply Constraints Longer Lasting Than Anticipated - Q&A Begins

FED
  • "Supply constraints have been longer lasting than anticipated; the drivers of higher inflation have been predominantly connected to the dislocations caused by the pandemic, specifically effects on supply and demand from the shutdown, the reopening, and ongoing effects of the virus itself." Says "Our tools cannot ease supply constraints".
  • As "supply and demand imbalances" adjust, "inflation will decline to levels much closer to 2% longer run goal".
  • "It is very difficult to predict the persistence of supply constraints or their effects on inflation. Global supply chains are complex. They will return to normal function, but the timing of that is highly uncertain."
  • "If we were to see signs that the path of inflation or longer-term inflation expectations was moving materially and persistently beyond levels consistent with our goal, we would use our tools to preserve price stability. We will be watching carefully to see if the economy is evolving in line with expectations."
  • Powell concludes by discussing the taper decision, basically from the statement. "Increases in our security holdings would cease by the middle of next year." "Our decision today to begin our tapering of asset purchases does not imply any direct signal regarding our interest rate policy. We continue to articulate a different and more stringent test" for rate hikes.
  • Q&A begins
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