Federal Reserve Chairman Jerome Powell admitted he was wrong to expect inflation to be temporary when it started rising three years ago.
“The fourth quarter of 2021 made it clear that inflation is not a transitory phenomenon,” Powell said on a rare television show. interview It will be broadcast on CBS’ 60 Minutes program on Sunday nights.
Mr. Powell and other Fed officials dismissed the rise in inflation in early 2021. This is because they believe that inflation is caused by temporary economic disruptions related to the pandemic and will resolve itself without the need for central bank action.
“What we saw was this inflation seemed to be largely confined to the commodity sector and supply chain story. We thought the economy is so dynamic that it would recover quickly. . And we thought that without our intervention, inflation would go away pretty quickly,” Powell said. “It will be a temporary thing.”
Powell said this was a widely held view among economists at the time, defending what he now considers to be a mistake. He also acknowledged that some economists have warned that inflation is likely to persist and that monetary tightening is needed.
The Fed realized it had made a mistake and moved to what would be considered more restrictive monetary policy. The Fed began preparing the market for the transition in summer 2021, but did not raise rates until March 2022.
“And we turned around and started tightening. As I said, it was essential that we did that. And that’s why inflation is now down. That’s part of the reason we do it,” Powell said.
The need to admit mistakes and raise interest rates is a subtle rebuke to: new york times Columnist Paul Krugman said, I clung to the scenery Inflation was temporary. Many progressives have argued, without evidence, that inflation would have been lower without the Fed’s tightening.
