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Fed Chairman Powell comments came across the wires with an unannounced response to Senator Rick Scott (Fla R) that too low inflation harms families and business. On low treasury yields he said they attested to strong global demand for safe liquid assets.

Powell Speech

Last week US March CPI +2.6% annual inflation rate, slightly higher than expected +2.5%, up from 1.7% in February but the highest reading since August of 2018 with main upward pressure coming from energy +13.2% vs 3.7% in February including gasoline +22.5% vs 1.6% prior.

Read: Energy Prices Pressure US Consumer Inflation Rate To Over 2 Year High

The University of Michigan's Consumer Sentiment For April (Prelim) survey found 1-year inflation expectations 3.7% vs 3.3% expected (3.1% prior) One year inflation expectations are at the highest since 2012. 5-10 year inflation expectations 2.7% vs 2.8% prior

Read: US Consumer Sentiment Higher With One Year inflation Expectations Highest Since 2012

Powell told Senator Florida Republican Rick Scott in a five-page letter responding to a March 24 letter raising concerns about rising inflation and the Fed's bond buying program:

"We do not seek inflation that substantially exceeds 2 percent, nor do we seek inflation above 2 percent for a prolonged period,"  "I would emphasize, though, that we are fully committed to both legs of our dual mandate - maximum employment and stable prices." 

Scott's office provided Powell's letter to Reuters, and suggested the response did not allay the senator's concerns.

"The data is clear that inflation is rising, and Chair Powell continues to ignore this growing problem," . "Senator Scott remains concerned about the impact inflation will have on low and fixed-income American families, like his growing up. He is calling on Chair Powell to wake up to this threat, lay out a clear plan to address rising inflation." Scott's office told Reuters in the email 

Highlights

  • Too low-inflation harms American families and businesses.
  • Fed is committed to both legs of dual mandate
  • We do not anticipate high inflation but have tools to address 1970s type pressures if they arise
  • Fed is buying bonds at a pace unrelated to magnitude of fiscal deficits
  • Low treasury yields attest to strong global demand for safe liquid assets
  • Recovery is strengthening
  • Unemployment rate underestimation shortfall in jobs rising
  • Covid cases is a cause for concern
  • Vaccinations offer hope for more normal conditions

Markets have been looking for leadership from the Fed on inflation and the volatility in the US treasury markets over the past month.

 

Source: TC, Economic Times

From The TradersCommunity News Desk

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