Long-distance questioning and response between the ECB and the Federal Reserve. After Christine Lagarde reiterated that inflation is transient and due to exogenous elements, Fed chairman Jerome Powell has displaced insiders: “It’s a good time for the Fed to withdraw the word” transitory “regarding inflation ”since the term“ transitory ”linked to price trends refers to leaving no permanent marks. Translated: the signs will be seen. Enough for Wall Street to expand sales and European markets to zero in on the day’s earnings.
According to Powell, therefore, the risks of higher inflation have increased: “The higher prices we are seeing are linked to supply and demand imbalances that may be related to the pandemic and the reopening of the economy. . But it may also be the case that price increases have spread more widely and I think the risk of higher inflation has increased. “
Powell then explained that “for many, transitory is associated with ‘short term’, but for us it is associated with inflation that does not leave a permanent mark on prices. I think it is probably the right time to withdraw the term ‘transitory’ ». Powell said the risks to a rise in inflation have increased and he still believes that most of the increase is linked to the pandemic that still keeps people out of the labor market: “It will take longer to see a recovery in the labor market. participation of the workforce ».
According to the Fed president, the increase in Covid cases and the new Omicron variant could slow progress on the employment front and economic growth in general, as well as adding greater “uncertainty”: “Greater concern about the virus could reduce people’s willingness to work face-to-face, slowing progress on the labor market and intensifying problems in supply chains ».