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Mester: The U.S. Recovery from the Coronavirus will be a “slow one”

Mester: The U.S. Recovery from the Coronavirus will be a “slow one” : Patrick Harke, a voting member of the Federal Open Market Committee, said on Friday

Mester: The U.S. Recovery from the Coronavirus will be a “slow one”
Yazar: Nora Palmer

Yayınlanma: 28 Ağustos 2020 17:28

Güncellenme: 6 Kasım 2024 10:26

Mester: The U.S. Recovery from the Coronavirus will be a “slow one” Patrick Harke, a voting member of the Federal Open Market Committee, said on Friday that he would be comfortable allowing inflation to rise as high as 3% so long as it does so at a slow and manageable rate. Meanwhile, Cleveland Fed President, Loretta Mester, said earlier on Friday that she believes more economic support will be needed from the central bank as the U.S. recovery from the coronavirus will be a “slow one.” Philadelphia Federal Reserve President Patrick Harker also said that it will take a significant amount of time before the U.S. sees unemployment figures return to their pre-coronavirus lows. “Right now, you’re seeing some signs of recovery, but basically it’s moving sideways,” Harker said of the U.S. labor market. “We still have 27 million that are on some form of unemployment and we won’t get fully back to the kind of employment —we had this great employment picture before the crisis — for quite a while.” Harker said. “If you think about it, it took us two years to go from 5% unemployment to 4% unemployment,” he added. “It took another year and a half to go from 4% to 3.5%, where we were before the crisis.” Harker also said investors could see consumer spending and retail revenues decelerate in August from July as the end of the federal government’s $600-a-week bolstered unemployment benefits curtails how much U.S. households spend. The commentary from both Mester and Harker comes less than a day after Powell announced a major policy shift and said the central bank will allow inflation to run hotter than normal to support the recovery of the labor market and broader U.S. economy. The Fed formally agreed to a policy of “average inflation targeting,” meaning it will allow inflation to run “moderately” above the Fed’s 2% goal “for some time” following a period of below-average price appreciation. Inflation has undershot the central bank’s 2% for most of the time since the financial crisis. In the 12 months through July, the core PCE price index increased 1.3% after rising 1.1% in June. The core PCE index is the preferred inflation measure for the Federal Reserve’s 2% target. Harker also thinks that the pace of inflation’s rise is more important than the number to which it rises. I’d be comfortable with inflation “somewhere north of 2%. But to me, it’s not so much the number, whether it’s 2.5% or 3%,” he said. “It’s whether it’s reaching 2%, creeping up to 2.5% or shooting past 2.5%.” “So, it’s really about the velocity of the inflation, not just the overall level,” Harker added. You might also be interested in:

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