According to the central bankers of the world’s developed economies, inflation is expected to rise until 2022. This view is shared by the current head of the US Federal Reserve System (Fed) Mr. Jerome Powell, who, on Wednesday, 29 September, called inflation frustrating and thinks that it will continue until next year. However, Mr. Powell still expects inflation to eventually ease, but said he sees current pressures to continue until next year. The foreign exchange – Forex market subsequently responded to this statement with a modest decline in the exchange rate of the US dollar (USD).
On 30 September 2021, at 7:01 am CET, according to the US Dollar Currency Index (DXY), which compares the exchange value of the USD with another six major world currencies, we have seen the USD at a price level of 94.30, with a daily decrease of -0.04% so far. At the time mentioned, the global currency pair EUR/USD traded on the Forex market at US$ 1.1604 per EUR, with a daily appreciation of EUR +0.08% against the USD. However, a few hours ago this currency pair traded below US$ 1.16 per EUR when it traded at a mutual exchange rate of US$ 1.1594 per EUR.
While assessing the current economic situation during a panel discussion organized by the European Central Bank, the head of the Fed, Mr. Powell said that “it is frustrating to acknowledge that getting people vaccinated and getting Delta under control 18 months later still remains the most important economic policy that we have,” in response to a question on the U.S. economic outlook. “And it’s also frustrating to see the bottlenecks and supply chain problems not getting better, in fact at the margin apparently getting a little bit worse,” acknowledged Powell. “We see that continuing into next year probably and holding inflation up longer than we had thought,” he said. “But ultimately the outlook for next year among my colleagues and me at the Fed for next year is quite a strong year with growth quite above trend and unemployment reaching significantly lower levels than now.”
Mr. Powell’s opinion on inflation and the fact that inflation is temporary was shared by Christine Lagarde, President of the ECB, who sat in this panel discussion with Powell, Governor of the Bank of England, Andrew Bailey and Bank of Japan Governor, Haruhiko Kurodou. According to economic correspondents, these central bankers reassured each other that they were sufficiently prepared to use the instruments of their monetary policy if inflation were to become a very serious problem for individual national economies.