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The President falsely repeats that inflation was 9% when he took office while the Fed Chairman admits that inflation is still “higher than expected” AND interest rates remain where they are highest level in 23 years.

By Sarah Ewall-Wice, senior US politics reporter for DailyMail.com in Washington, DC

23:12 May 14, 2024, updated 00:20 May 15, 2024

Federal Reserve Chairman Jerome Powell admitted that inflation has remained more persistent than officials expected, meaning interest rates could stay higher for longer in the midst of an election year.

The remarks came Tuesday as President Joe Biden repeated a false claim about rising prices that affected his first term – saying inflation was 9% when he took office while it was actually 1.4%.

“We didn’t expect the situation to go smoothly, but the rates have been higher than anyone expected,” Powell said Tuesday, referring to the lack of progress in combating inflation.

“What this told us is that we will have to be patient and let the restrictive policy do its work,” he added at an event organized by the Foreign Bankers Association in Amsterdam.

Federal Reserve Chairman Jerome Powell speaking at the Foreign Bankers Association event in Amsterdam

The US central bank official reiterated similar remarks he made earlier this month, noting that “it appears that it will take us longer to be sure that inflation will come down to 2% at over time.”

The latest Consumer Price Index (CPI) for April is scheduled to be released on Wednesday, May 15. Economists expect prices to rise 3.4 percent year-on-year.

Data showed higher-than-expected inflation at 3.5% year-on-year in March, driven by rising property and gas prices. Month-on-month inflation in March increased by 0.4 percent.

On Tuesday, the producer price index, which measures wholesale prices, also came in higher than economists’ forecasts for April. Powell called the report “mixed.”

Inflation reached 3.5% in March, with prices pushed up by the high cost of housing and gas.
Investors previously expected around four rate cuts this year. However, the Fed chose to keep rates at their current level at its last meeting in March.

The higher-than-expected numbers indicate the Federal Reserve may push back its interest rate cut timetable.

Interest rates remain at a 23-year high, with the federal funds rate hovering between 5.25 and 5.5 percent after inflation peaked at 9.1 percent in June 2022.

While Powell said inflation was higher than expected, he also pointed to last year’s “historically rapid disinflation” as the price surge slowed significantly from its peak.

He attributed the easing of shocks from the coronavirus pandemic as well as restrictive monetary policy.

Powell said it was unclear whether inflation would be more persistent in the future, saying they needed more data than just the first quarter of the year.

He also said of the interest rate hike: “I think it may take longer than expected to do its job and bring inflation down.”

But he remains confident that they will be able to bring the score back to their goal.

President Joe Biden speaking at an event in the Rose Garden on May 14

Biden has touted slowing inflation over the past year, but acknowledged there is still work to do. His administration has maintained the importance of an independent Federal Reserve when it comes to setting interest rates.

But on Tuesday, Biden made a false claim about skyrocketing inflation during his term in an interview with Yahoo Finance.

“I think inflation has gone up a little bit,” Biden said in the interview. He said it was “nine percent when I arrived, and now it’s down about 3 percent.”

While inflation reached more than 9% during his presidency as the United States emerged from the pandemic, it was below 2% – 1.4% year-on-year in January 2021 – when he began his presidency .

Biden made a similar false statement last week during an interview with CNN.

In the same interview Tuesday, Biden said of inflation “we’re going to be able to manage this” and “we’re just focused on that.”

News Source : www.dailymail.co.uk
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