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Fed director Lael Brainard: controlling inflation is "the most important task"

2022-01-13T10:59:26.398Z

US consumer prices are rising faster than they have been in 40 years. According to Fed Director Brainard, the fight against inflation is the central task of the US Federal Reserve: the population is concerned.



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Lael Brainard: Uncertainty as to whether salaries are still sufficient for purchases

Photo: Susan Walsh / AP

The inflation rate in the USA is currently seven percent.

Recapturing this "too high" rate is, according to Fed Director Lael Brainard, the "most important task" for the US Federal Reserve at the moment.

Many people in the country are concerned about the dwindling purchasing power, said Brainard after the announcement of the rise in consumer prices.

Brainard was nominated in November by US President Joe Biden for the office of Vice Chairman of the Federal Reserve.

She is supposed to replace the current vice-president Richard Clarida, who resigns prematurely after an affair about securities transactions.

"Our monetary policy is focused on bringing inflation back down to two percent while maintaining an upswing that benefits everyone," said Brainard, according to the text of the speech.

She wants to present her statement this Thursday at the beginning of a hearing on her nomination in the US Senate.

Brainard has been a member of the Fed's board of directors, which can consist of up to seven members, since 2014.

Brainard was quoted as saying that the working population in the USA was unsure whether the salaries were still sufficient for purchases.

The Fed's monetary policy is therefore focused on pushing inflation back to two percent while maintaining the economic recovery that everyone must achieve.

That is the Fed's most important task.

Will there be three or even four rate hikes in the US in 2022?

The inflation rate is also high in Germany. In December, consumer prices rose by 5.3 percent compared to the same month last year - not as much as they were last almost 30 years ago. In the euro zone, goods and services cost an average of 5.0 percent more in December than a year earlier. This is the highest value since the statistics began in 1997. In view of this worsening situation, the European Central Bank, which has long dismissed inflation as a temporary phenomenon, is considering turning away from its previous monetary policy.

Rising energy prices could force the ECB to take action against inflation, said director Isabel Schnabel most recently. The turn to green energy sources carries the risk of higher inflation in the medium term. In the fight against inflation, however, Federal Minister of Economics Robert Habeck has advocated a quick move away from fossil fuels. The Greens politician said: "Gas, oil, coal - that's what is driving prices up at the moment."

In view of the situation in their country, some monetary watchdogs in the USA are already pushing for several interest rate hikes. "I now think that we should maybe take four steps in 2022," said the head of the St. Louis central bank district, James Bullard, the "Wall Street Journal". The US Federal Reserve's forecast recently assumed up to three steps. Bullard's colleague Patrick Harker from Philadelphia told the Financial Times that he was in favor of a series of three increases that could start as early as March. The key interest rate is currently still in the extremely low range of 0.0 to 0.25 percent.

At the same time, the rate of price increases in the USA is currently higher than it has been since 1982.

US President Joe Biden also admitted on Wednesday that the acceleration in prices was still too high.

His government needs to work harder as inflation is a burden on private households.

The Fed had been supporting the economy and markets with massive aid programs since 2020 because of the corona crisis.

In the meantime, the Fed has already initiated the U-turn in its monetary policy - away from the economic support measures of the corona crisis and towards a reduction in aid.

The billion dollar bond purchases by the central bank, for example, which provide the markets with additional liquidity but can also accelerate inflation, will be discontinued by March.

Fed chairman Jerome Powell recently signaled to a congressional committee that the very loose monetary policy line would soon be obsolete and that the economy was ready for a tighter monetary policy despite the corona wave.

apr / dpa / Reuters

Source: spiegel

All business articles on 2022-01-13

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