Biden says inflation is temporary; The Fed should do what it deems necessary for the recovery

Customers visit the Macy’s flagship store in New York, New York, United States, May 20, 2021. REUTERS / Eduardo Munoz

WASHINGTON, July 19 (Reuters) – US President Joe Biden on Monday said a price hike should be temporary, but his administration understood longer-term runaway inflation would pose a “real challenge” to the economy and would remain vigilant. .

Biden said he recently told Federal Reserve Board Chairman Jerome Powell that the Fed is independent and should take whatever action it deems necessary to support a strong and lasting recovery.

“As our economy is coming back in force, we have seen price increases,” Biden said, while dismissing fears that the recent increases were a sign of persistent inflation.

He said his administration was doing everything possible to address supply chain bottlenecks that had driven up car prices, and noted that lumber prices are now falling after initially rising. of the recovery.

“I want to be clear: my administration understands that if we were to experience uncontrolled inflation in the long run, it would pose a real challenge to our economy,” he said. “While we are convinced this is not what we see today, we will remain vigilant for any necessary response.”

Biden said he made this point clear to Powell as well: “The Fed is independent. It should take whatever action it deems necessary to support a strong and lasting economic recovery.”

Growing concerns about inflation pushed US consumer confidence to its lowest level in five months in early July, a survey found Friday after a 0.9% rise in consumer prices in June, the largest increase in 13 years, but economists continue to believe that higher inflation is transitory. Read more

The Democratic president said his plans to invest more in infrastructure, as well as better care for the elderly and children, would help reduce inflationary pressures in the future by increasing productivity.

“These measures will improve our productivity, by increasing wages without raising prices,” he said. “This will relieve the pressure of inflation, give a boost to our workforce, which will lead to lower prices in the years to come.”

He said critics have repeatedly warned that his economic policies will lead to the end of capitalism, but economists are now predicting that the United States will achieve its highest rate of economic growth in 40 years.

“It turns out that capitalism is alive and well,” he said. “We are making serious progress in making sure this works as it is meant to work for the good of the American people.”

Reporting by Steve Holland and Andrea Shalal; Editing by Andrea Ricci

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