EFEWashington

The chairman of the United States Federal Reserve on Wednesday reiterated his view that the current spike in inflation is due to transitory factors and that consumer prices will moderate once supply chain bottlenecks ease.

But Jerome Powell also said the central bank is prepared to take action if the problem proves more intractable than expected.

The Fed chief spoke at a press conference after the latest two-day meeting of the Federal Open Market Committee (FOMC), the central bank's monetary policy-making body.

Powell and the other voting members of the committee once again decided unanimously to further stimulate the economy by leaving the Fed's benchmark interest rate unchanged at a target range of 0 to 1/4 percent and continuing to increase the central bank's holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion a month.

During the press conference, Powell acknowledged that the US inflation rate has been above the Fed's long-term target level of 2 percent and may remain high in the coming months before moving closer to the central bank's objective.

The Fed chairman reiterated his assessment that the 5.4 percent increase in the consumer-price index in June, the highest level in 13 years and the third straight month of greater-than-expected inflation, was primarily due to hikes in certain categories of goods and services that were directly affected by the Covid-19 crisis and the economic reopening.

He gave the example of airplane tickets and used cars, whose prices both have risen sharply along with the lifting of coronavirus restrictions.

"Indicators of long-term inflation expectations appear broadly consistent with our longer-run inflation goal of 2 percent," Powell said. "If we saw signs that the path of inflation or longer-term inflation expectations were moving materially and persistently beyond levels consistent with our goal, we would be prepared to adjust the stance of policy."

Despite growing inflation concerns among investors, Powell said the Fed intends to maintain an accommodative monetary policy stance - including leaving its federal-funds rate at between zero and 0.25 percent and continuing monthly asset purchases at the same level - until the outcomes of maximum employment and 2 percent inflation over the longer run are achieved.

Even so, he said the Fed is considering tapering, or reducing, asset purchases from their current monthly level of $120 billion, suggesting that will happen much sooner than an interest rate hike, which is not "on our radar screen right now."

In analyzing the US economic situation, Powell said the sectors hardest hit by the pandemic have been bouncing back but still have not completely recovered; he pointed in particular to sharply lower production in the auto industry due to global semiconductor shortages.

The crisis also has had an unequal impact on the US population, according to the Fed chief, who said that although economic activity and employment levels continue to improve joblessness remains disproportionately high for low-wage workers in the service sector and for Hispanics and African-Americans.

Powell said the country remains far from the goal of full employment but predicted that progress will occur on that front over the next year or two. He stressed, however, that the evolution of the economy still depends on the course of the virus and, to a large degree, on vaccination rates.

It should not take long for employment levels and salaries to rise, he added, considering the amount of job offers relative to the number of unemployed persons.

Separately, the FOMC on Wednesday announced the creation of two facilities that will serve as backstops in money markets to support the effective implementation of monetary policy and smooth market functioning. EFE

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