Inflation has jumped among the main concerns of American business leaders, according to a survey published Thursday, while the future number 2 of the central bank confirmed that the institution was in the process of refining its weapons, ready to act.
“I am very concerned regarding the high level of inflation,” said Lael Brainard, the future vice-president of the American central bank (Fed), during a hearing before the Senate banking committee.
“We hear working families across the country talking regarding inflation (…). We have a powerful tool and we are going to use it,” she said.
Faced with prices that climbed 7% in 2021, their biggest increase in nearly 40 years, the powerful Federal Reserve is therefore on the verge of war.
Its weapon: key rates, which it is preparing to raise earlier and stronger than expected, probably from March. The objective: to increase the cost of credit, and, by extension, to reduce consumption.
“We have a tool that acts on demand, which is the key rate,” stressed the future number 2 of the Fed, which, if her appointment is confirmed by the Senate, will take office in February.
– Supply and demand –
But the exercise is delicate, because it is necessary to avoid hitting too hard, which would weigh on the job.
Brainard said she was convinced that the actions the Fed will take “will reduce inflation while continuing to allow the labor market to regain its full strength over time. We will therefore return to full employment while bringing back employment. inflation at 2% “.
Inflation has also become a major concern for business leaders, who are worried that it will persist beyond 2022, according to a survey released Thursday by the Conference Board economic research center.
A tight labor market, demand that remains strong and an uncertain trajectory of the Covid might, however, contribute to further increase prices, warned Thursday Jason Furman, former economic adviser to President Barack Obama and professor at Harvard, in an article published by the Wall Street Journal.
“I expect inflation to remain high this year, maybe even more than in 2021,” he warned.
But economists remain divided: “I continue to believe that (…) the unwanted surge in inflation in 2021 (…) will ultimately prove to be largely transitory with an appropriate monetary policy”, thus commented the current Fed Vice Chairman Richard Clarida in a research paper released Thursday.
– “Bidenflation” –
While the central bank can act on consumer demand, it has no leverage on the other source of price increases: supply, that is to say disruptions on the market. global supply chain.
They did not resolve as expected by many analysts, and may even be enhanced by the Omicron variant.
In the United States, this phenomenon is compounded by labor shortages that slow production and deliveries, further limiting supply.
Opposite, demand is very strong, thanks to financial aid from the government in the face of the pandemic, but also to the fortunes of property owners and holders of equity portfolios which have grown, with the rise in the prices of these assets.
This skyrocketing cost of living is one of many thorns in Joe Biden’s side, and the Republican opposition has blamed him for it, now dubbing the price hike “Bidenflation”.
To act on the offer, the White House must announce new measures to reduce congestion in American ports.
A brief brightening, however, came in wholesale prices, which rose 0.2% in December, much slower than in previous months, according to the PPI index, a measure of inflation on the manufacturers’ side and sellers, released Thursday by the Labor Department.
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