Inflation and pandemic hit early-stage eurozone recovery, ECB member says

The eurozone’s recovery from the pandemic hit is still incomplete and the recent inflation shock and a new pandemic wave are jeopardizing the resumption, ECB (European Central Bank) member Fabio Panetta said on Thursday. .

“The inflationary jump from global supply shocks and the resurgence of the pandemic are hitting the eurozone at an early stage of its recovery,” Panetta told a conference.

“Not only are we still far from having returned the economy to its pre-pandemic trend, but services activity and investment remain well below their pre-pandemic levels,” he said.

Finland’s central bank chief Olli Rehn, meanwhile, has kept his description of the current rise in inflation as “transient,” even as US central bank colleagues advocated this week abandoning the mantra.

“I recognize that our citizens’ micro experience at the fuel pump is quite different from the macro reading of economists and central bankers,” Rehn said at a conference.

“Still, in our opinion, eurozone inflation is largely transitory … even though some of its components are likely to prevail longer into next year than expected,” he said.

Inflation in the USA

US Treasury Secretary Janet Yellen said on Thursday that lowering tariffs imposed by the Trump government on goods imported from China through a resumption of a tariff exclusion process could help alleviate some inflationary pressures, but not would represent “a game changer”.

Yellen told the Reuters Next conference that she believed tariffs of up to 25% on hundreds of billions of dollars in annual imports from China “contribute to higher prices in the United States”.

“And the Trump tariffs that have been put in place, some of them create problems without any real strategic justification,” she added.

Previous specific tariff exclusions for Chinese products had expired at the end of 2020, but US Trade Representative Katherine Tai launched a new targeted tariff exclusion process as part of her commitment to Chinese authorities in the “Phase 1″ trade agreement ” signed in early 2020.

Yellen cited the foreclosure process among other steps the Biden administration is working to mitigate pricing pressures, including working with ports and private companies to unlock supply chains and keep products flowing to consumers.

“This is a process by which tariffs can be reduced. And I think that could be useful,” she said of the tariff exclusion process. “Again, it’s not a game changer. But these are things we’re doing to try to mitigate these pressures.”

Yellen said she currently doesn’t have a visit to China on her agenda but hopes to continue to engage with her colleague, Vice Premier Liu He, on a range of economic issues.

On the list of these issues are China’s technology practices, securities markets, exchange rate practices, and China’s efforts to rebalance its economy toward giving more weight to household consumption.

Yellen said the Asian country “could make a great contribution to mitigating global imbalances. These are all topics that we have been discussing and I hope these dialogues will continue.”

‘Strident’ measures

Atlanta Federal Reserve (Fed) Chairman Raphael Bostic told a Reuters Next conference on Thursday that if inflation doesn’t retreat as expected in the next year or two, the Fed may need to “take more strident measures” to control it.

Bostic, who has already fanned at least one interest rate hike in 2022, said his preferred path towards the Fed’s so-called “neutral” interest rate in coming years would be “slow and steady”.

But the central banker mused that if the momentum he now expects to impose downward pressure on inflation fails to materialize, “we may have to take more shrill steps.”

As Federal Reserve (Fed) officials always need to be prepared for various economic scenarios, it may be time to start drawing up a plan to raise interest rates in order to face above-target inflation, the Fed chairman said on Thursday. from San Francisco, Mary Daly.

Monetary policy makers may need to start scaling back some of the extra monetary easing measures they’re “giving the economy and starting to come up with a plan to at least, you know, think about raising the interest rate,” Daly said at the event. virtual hosted by the Peterson Institute of International Economics.