Inflation could hit its target sooner than expected as the US economy bounces back, Kansas City Fed chief says
- A quick recovery among the US's hardest-hit businesses could drive a faster-than-expected rebound for
inflation, Esther George, president of the Federal Reserve Bank of Kansas City, said Tuesday.
Fedaims to reach inflation of at least 2% before considering lifting its benchmark interest rate, but price growth has trended below that level for years and fell further at the start of the pandemic.
- Struggling industries like travel and hospitality could be placing outsized downward pressure on inflation, George said.
- "Inflation could approach the Committee's average inflation objective more quickly than some might expect," if vaccination and stimulus can swiftly revive these beleaguered sectors, she added in prepared remarks.
Inflation could leap to its target much faster than expected as widespread vaccination revitalizes the US
US price growth has failed to hold steady at its 2% target for years, and the coronavirus pandemic saw inflation nosedive as economic activity froze.
"Price inflation for many other categories of consumption (particularly goods) has moved up, sometimes quite sharply," George said in remarks for delivery at Central Exchange in Kansas City. "Such a scenario does not suggest higher inflation is a near-term threat, but rather that inflation could approach the Committee's average inflation objective more quickly than some might expect."Read more: A leading Wall Street firm asked 7 famous investors about their favorite stocks and the global trades they're using to stay ahead of the competition. Here's what they're betting on now.
The Fed's updated inflation target joins maximum employment as the two criteria necessary for the central bank to lift interest rates. Fed policymakers said last month they expect the benchmark interest rate to stay near zero for at least two more years, adding it would need to see "substantial further progress" toward reaching its inflation and employment goals to consider tightening monetary conditions.While George strayed from providing her own timeline for expected inflation, Atlanta Fed President
He continued: "A whole lot would have to happen to get us there."
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