Economy

US Fed chair sees inflation easing in first half of 2022

'We do expect in first half of next year to see some relief, inflation should move down,' Powell says

Ovunc Kutlu   | 01.10.2021
US Fed chair sees inflation easing in first half of 2022

ANKARA

US Federal Reserve Chairman Jerome Powell said he expects the current high level of inflation to decline during the first half of next year.

"We do expect in the first half of next year to see some relief, depending on the bottleneck in question, and inflation should move down," he said on Thursday during his speech before the US House of Representatives Committee on Financial Services.

"Inflation is elevated and will likely remain so in coming months before moderating. As the economy continues to reopen and spending rebounds, we are seeing upward pressure on prices, particularly due to supply bottlenecks in some sectors," he said in his prepared remarks.

On Wednesday, Powell had said at the European Central Bank (ECB) Forum on Central Banking 2021 that he expects production bottlenecks and supply chain problems to continue next year and holding up inflation longer than earlier estimates.

The consumer price index (CPI) in the US rose 5.3% in August on an annual basis, after climbing 5.4% in June and July. The producer price index (PPI) soared 8.3% in August annually, after jumping 7.8% in July, according to the latest figures from the US Labor Department.

Powell also hinted at the Committee that the Fed may raise interest rates to bring inflation under control if macroeconomic indicators suggest prices rising to unsustainable levels.

Stressing that the central bank needs to balance inflation and rate hikes, he said: "Our expectation is that inflation will come down and we won’t ultimately face that difficult trade-off of having the two goals in tension."

The Fed head said that US economy is far from full employment, and that gives the central bank some incentive to keep the interest rates at historically low levels for the moment.

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