Fed’s Powell: Supply side constraints are holding back the economy

Speaking on a European Central Bank panel discussion, alongside Lagarde and Kuroda, Fed chair Jerome Powell mentioned the US economy is getting close to achieving the bar for tapering asset purchases. As he mentioned on Tuesday at the Senate, Powell reiterated that interest rate rises are still a way off.

According to Fed’s Chair, transitory inflation means that inflationary spikes won’t lead to higher inflation. They consider the current spike is due to supply constraints meeting very strong demand. The Fed would respond if inflation remains too high for too long, warned Powell.

Regarding growth, Powell mentioned estimates for Q3 GDP have come down, but still remain at strong levels.

Market reaction

The US dollar remains at daily highs, having the best performance in months. The DXY heads for the highest close in months above 94.00 and EUR/USD is testing 1.1600.

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