Far from the economy's maximum employment target

The USA Federal Reserve (Fed) Chairman Jerome Powell stated that the country's economy is "far away" from its maximum employment target.

Powell and US Treasury Secretary Janet Yellen answered questions from members of the US Senate Committee on Banking, Housing and Urban Affairs.

Pointing out that the supply-side constraints underlying inflation have worsened, Powell underlined that supply bottlenecks must be resolved before inflation can be reduced.

Powell stated that he believes that inflation will decrease and that there is still a link between inflation and employment, although weaker than in the past.

Referring to the maximum employment and inflation targets they consider in reducing their asset purchases, Powell noted that they are far from the maximum employment target. Powell stated that even if the Fed reduces its asset purchases, it will continue until the middle of next year.

Drawing attention to the importance of raising the debt ceiling, Powell stated that the consequences of not raising the debt ceiling would be disastrous, and that the Fed would not be able to protect the American economy from default if the debt ceiling was not raised.

Yellen reiterates her warnings on debt limit

Treasury Secretary Yellen also stated that the failure of Congress to increase the debt ceiling would be a financial disaster and tragedy, and reiterated that the consequences of the US default would be severe.

Pointing out that not raising the debt ceiling could jeopardize the creditworthiness of the country, Yellen said that the debt ceiling is not related to future plans, it is entirely related to past debt obligations.

Yellen emphasized that both parties share the responsibility of raising the debt ceiling, and that nothing could be more harmful for the dollar than not increasing the debt ceiling.

Making evaluations about the inflation in the country, Yellen said that they expect inflation to approach 4 percent by the end of the year.