Stocks rose slightly after their comments.
As the economy reopens and shopping and spending begin to resume in earnest, investors have begun raising valid concerns about the possibility of wide-spread inflation in the United States. In order to avoid this inflation, some investors have been calling on the Federal Reserve to make policy changes, but according to Fed officials, any inflation running off from the pandemic will only be temporary.
The Fed’s Vice Chair Richard Clarida expressed confidence to Reuters that they have the means to curb inflation and get the economy back on track toward normalcy, and that any minor bouts of inflation that occur in the meantime will be “largely transitory.”
He added that data will likely continue to show volatile futures until the labor market stabilizes, noting that the recent jobs report “really highlights a fair amount of near-term uncertainty about the labor market.”
Federal Reserve officials maintain their belief that price increases from the recovering economy will be transitory. https://t.co/wIGoT0F7C4
— TheStreet (@TheStreet) May 26, 2021
Other big players in the financial world have echoed Clarida’s sentiments. San Francisco Fed Bank President Mary Daly is optimistic about the improvement of the economy, but believes it’s too early to change course just yet. “What we’ve seen is some really bright spots, some very encouraging news,” she told CNBC. “It gives me hope, and I am bullish for the future. But it’s too early to say that the job is done.”
“While bouts of Treasury market volatility may occasionally revive pandemic-era mega-cap outperformance, we believe economic reopening and rising inflation remain the most potent near-term drivers for global financial markets,” Mark Haefele, chief investment officer at UBS Global Wealth Management, said. “We think the reflation trade has further to run, favoring sectors such as financials and energy.”
After the comments made by Clarida, all three major stock indexes rose slightly in value.
