Federal Reserve Board Chair Jerome Powell said recent inflation was unpleasantly above levels consistent with central bank targets, but still expected most of recent price pressures to reverse.
“This is a shock through the system associated with the resumption of the economy, well above inflation by well above 2%, and of course we are not happy with it,” Powell told lawmakers Thursday. Told. The Federal Reserve Board leader has returned to Capitol Hill this time in front of the Senate Banking Commission for the second day of testimony on economic and monetary policy.
Powell said pandemic-related bottlenecks and supply constraints on other small groups of goods and services led to rapid price increases. He said it was a mistake to overreact to inflation: Temporary rise in the price of certain servicesGoods that have skyrocketed due to economic resumption, such as air travel and hotel fares, or new and used cars.
Consumer prices in the United States continued to accelerate in June at the fastest pace in 13 years as the recovery from the pandemic gained momentum.Ministry of Labor on Tuesday Consumer price index rises 5.4% From a year ago to June. Excluding the unstable food and energy categories, prices rose 4.5% year-on-year, the highest in 30 years.
“The challenge we face is how to deal with this inflation, which is bigger than we expected, or bigger than everyone expected,” Powell said. “And as long as it’s temporary, it wouldn’t be appropriate to react to it, but as long as it gets longer and longer, the risk needs to be reassessed.”
Powell said the central bank is in an unknown territory. “We have never finally reopened the $ 20 trillion economy and received a lot of financial and financial support,” he said. “We are humble … trying to understand the basic cases and risks.”
Share your thoughts
What would you ask Powell at the hearing if you had the opportunity? Join the conversation below.
Powell said he hasn’t rushed to compare the Fed’s $ 120 billion in monthly Treasury securities or mortgage securities purchases.Some Fed governors have shown that they are enthusiastic Start slowing down the pace of those purchases. Other Fed officials have suggested that central banks should not be in a hurry.
“It’s an ongoing discussion we plan to do,” Powell said. His comments do not suggest that the Fed is ready to make a final decision at its next meeting, July 27-28.
The Fed has kept interest rates near zero since the coronavirus pandemic hit the US economy in March 2020. The central bank has returned to what it calls maximum employment, with inflation slightly above the Fed’s 2% target and the labor market cured.
Powell said current inflation levels are well above the Fed’s target. “This isn’t just over 2% on any stretch … and we understand that,” he said.
The central bank is also committed to continuing to buy bonds until it achieves “substantial further progress” towards its inflation and employment goals.
Powell said Wednesday that the economy “is still a long way off” as it reaches that standard, but authorities expect progress to continue.
Write to Nick Timiraos [email protected]
Copyright © 2021 DowJones & Company, Inc. all rights reserved. 87990cbe856818d5eddac44c7b1cdeb8