By Yasin Ebrahim

Investing.com – Federal Reserve Chairman Jerome Powell is expected to highlight of “upside risks” to inflation as bottlenecks, hiring difficulties, and other drivers of price pressures continue, but will continue to suggest these pressures will prove transitory, according to prepared remarks ahead of his testimony due Tuesday for the Senate Banking Committee.     

The testimony stated that “Blockages, hiring problems, and other restrictions could again prove more persistent than anticipated, which can pose upside risks to inflation.”  These effects were “larger than expected and more long-lasting than predicted, but they will subside and inflation should drop to our longer-term 2 percent target.

If, however, the prices pressures prove to be more sustained than expected, and become a serious concern, the Fed would use its “tools to ensure that inflation runs at levels that are consistent with our goal,” Powell will say in prepared remarks. 

Powell expects to speak out on the labor markets, stating that “diminishing progress towards containing the virus” should be achieved if factors such as the caregiving need and continued fears about the pandemic are not considered.