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.
In a speech that he will deliver to the Senate Banking Committee, the central bank chair said economic growth has “continued to strengthen” but has been met with upward price pressures caused by supply chain bottlenecks and other factors.
“Inflation is elevated and will likely remain so in coming months before moderating,” Powell said. “As the economy continues to reopen and spending rebounds, we are seeing upward pressure on prices, particularly due to supply bottlenecks in some sectors. These effects have been larger and longer lasting than anticipated, but they will abate, and as they do, inflation is expected to drop back toward our longer-run 2 percent goal.”
The remarks are part of mandated testimony Powell must give to Congress regarding the Fed’s economic response to the Covid-19 pandemic. He will speak Wednesday to 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 hikes.
“We at the Fed will do all we can to support the economy for as long as it takes to complete the recovery,” Powell said.
