US Fed vice chairman says inflation 'far too high'

Stocks tick up slightly after report on slowing inflationary pressures

For the first time ever, the price for a gallon of regular petrol has hit more than $5. AP

US President Joe Biden speaks about the economy and inflation at the Port of Los Angeles in California. AFP

Tampons have reportedly been in short supply in stores across the US due to global supply chain issues. AFP

Pay rates displayed at a Taco Bell fast food outlet in Sacramento, after the California minimum wage was increased due to inflation. AP

Various grades of petrol, with prices above $7 per gallon, are displayed at a Chevron gas station in central Los Angeles, California. AP

The rising cost of items including clothing, food, petrol and cars is hitting Americans' pockets, despite historically low unemployment. AFP

Mr Biden announces plans to fight inflation and lower costs. Reuters

Supermarkets across the US are struggling to keep shelves stocked because of supply chain issues. Willy Lowry / The National

Protesters with the Centre for Popular Democracy stage a demonstration in support of employment rights in June 2022. Reuters

Diners in San Francisco, California. With prices so high, many US consumers say they are cutting back on eating out. AFP

Bags of purchases from a Dollar Tree store in Jackson, Mississippi. The company sells items at $1. AP

Volunteers gather food to hand out at a West Texas Food Bank drive-through in Odessa, Texas. Bloomberg

A hiring poster at a Chipotle fast food restaurant in Los Angeles, California. US unemployment stands at 3.6 per cent, about 0.1 per cent above a 50-year low in 2019. EPA

Supermarket shoppers in Rosemead, California. High food prices are causing hardship for some Americans. AFP

Mr Biden speaks on lowering costs for American families in Illinois. Bloomberg

Nearly empty shelves in a supermarket in Orlando, Florida. AP

Michael Barr, the Federal Reserve vice chairman of supervision, said on Tuesday that inflation is “far too high” and predicted that the US economy would soften after a report announced inflation could be slowing.

“I think that if that's the case, we are going to see significant softening in the economy,” Mr Barr told Congress, although he declined to offer a specific forecast for how high the unemployment rate may rise.

Later he added: “There is not a recession right now — we're in a period of slower economic growth.”

The Nasdaq and S&P 500 rose slightly on Tuesday after a report was released on the producer price index, which is seen as a measure of wholesale inflation. The PPI rose 0.2 per cent in October, the report said, lower than previously estimated.

And a consumer price index report last week said that inflationary pressure was slowing.

Pressed by John Kennedy, a senator from Louisiana, about predictions from economists such as Jason Furman and Lawrence Summers that unemployment would need to rise substantially to bring down inflation, Mr Barr said he does not have a precise forecast, though the unemployment rate will be an “important factor” in setting policy.

Mr Barr is also a monetary policymaker with a permanent vote on Fed interest rate decisions.

He said a weakening outlook for the economy was another risk to the financial system.

Since March, the Fed has raised its benchmark interest rate from near zero to a range of 3.75 per cent to 4 per cent, including four straight increases of three quarters of a percentage point.

Rate increases are likely to continue into early 2023, though they are projected to slow their pace amid some promising signs that inflation pressures have begun easing.

Still, the tighter financial conditions engineered by the Fed pose risks for banks, Mr Barr said.

“A weaker economy could put stress on households and businesses and, thus, on the banking system as a whole.”

Reuters contributed to this report