Fed Chair Powell to warn Congress that inflation pressures could last longer than expected
Federal Reserve Chairman Jerome Powell, in remarks to be delivered Tuesday, cautioned Washington legislators that the causes of the recent rise in inflation may last longer than anticipated.
The central bank chairman stated that economic growth had “continued and strengthened” but was being met by rising prices due to supply chain bottlenecks, among other factors.
Powell declared that “inflation remains elevated” and would likely continue to rise in the months ahead of any moderation. As the economy rebounds and spends increase, inflation is expected to rise. This could be due in part to higher prices because of supply issues in certain sectors. Although these effects are more severe and lasting than expected, they will eventually subside and inflation should drop to our long-term 2 percent target.
This testimony is required by Congress to be given to Powell regarding the Fed’s economic response in the wake of the Covid-19 pandemic. On Wednesday, he will address the House Financial Services Committee.
Following its meeting last week, the Fed indicated it soon will start pulling back on some of the stimulus it has provided during the crisis. However, officials have stressed that the reduction of monthly asset purchases is not tantamount to looming interest rate hike.
Powell declared that “We at Fed will do our best to support the economy as long as necessary to ensure it continues to recover.”
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