According to U.S. Fed Chairman Jerome Powell, global inflationary pressure will reshape the economy. He acknowledged that “we now understand better how little we understand about inflation”.
Jerome Powell spoke about inflation recently during a conference in Sintra, Portugal. The Fed chairman believes that the economy will not return to the level of price control exercised before the pandemic caused by the new coronavirus.
Before the pandemic, prices were rising slowly and gradually. Now, central banks must act to stabilize prices in a new global economic landscape.
“Since the pandemic, we live in a world where very different forces are driving the economy, and we know that. We don’t know whether we will return to something that looks more or somewhat like what we had before.”
The Fed chairman directs that the U.S. central bank should maintain price controls in this new economic configuration and ensure the maximum supply of jobs in the marketplace.
Inflation worries Fed’s president
The rise in the large-scale global inflation index is hitting countries like the United States, triggered by rising fuel and food prices. In addition, since the pandemic, there have been problems in the offer of supplies that have boosted the accumulated inflation over the past two years.
In the United States, for example, the inflation index is registering figures not seen in the last 40 years. As a result, the Central Bank has constantly raised the interest rate to contain this increase.
According to Powell, the interest rate increase is a move by the Fed to contain commodity prices by slowing economic growth.
“The purpose is to slow growth so that supply can have a chance to recover.”
However, the Fed chairman acknowledges the unpredictability of the effects of the inflation index on the economy. For him, it isn’t easy to understand how the market will react in the face of the impact on commodities supply and rising food and fuel prices.