Fed Vice Chair Richard Clarida said he expected inflation to “return to – or perhaps run somewhat above – our 2% longer-run goal in 2022 and 2023”. That would actually fit under the new policy framework. Though, he admitted that he was “surprised by higher-than-expected inflation data released today”. Still, “it’s important that pressures to inflation be transitory”.
Clarida also said that “the near-term outlook for the labor market appears to be more uncertain than the outlook for economic activity.” He added, “What this necessary rebalancing of labor supply and demand means for wage and price dynamics will depend importantly on the pace of recovery in labor force participation as well as the extent to which there are post-pandemic mismatches between labor demand and supply in specific sectors of the economy and how long any such imbalances persist.”
