Fed’s Powell Tells Congress Inflation Will Soon Moderate

The United States Federal Reserve Chairman Jerome Powell assured lawmakers on Wednesday that the sharp rise in inflation this year will soon ease.

In his testimony before the House of Representatives Financial Services Committee, Powell said that despite the rise in consumer prices, which he expects to remain elevated in coming months, before moderating, noting that it is due to narrow effects and came higher than what the Fed was hoping to see.

Powell attributed the rise in inflation to the base effects, compared with the corresponding period of last year during the first wave of the pandemic; production bottlenecks and supply disruptions; and demand recovery.

The Fed Chair said that the central bank is as anxious as everybody else is regarding inflationary pressures persisting.

As for the labor market, Powell acknowledged progress but said there is still a long way to go, forecasting job gains to be strong in the coming months, as public health conditions continue to improve.

Powell reiterated the Fed’s patience in dealing with the developments, warning that it would be wrong to act prematurely in response to inflation

The Chairman expressed a positive sentiment, with the Fed officials expecting recovery progress will continue, despite signs of the anticipated substantial further progress not showing yet.

However, the Fed will continue to discuss tapering asset purchases in its coming meetings, prepared to change its current path if it saw “signs that the path of inflation, or longer-term inflation expectations, were moving materially and persistently beyond levels consistent with” with the FOMC’s 2% target sustainable target.

He also noted that mortgage-backed security purchases work a lot like Treasury purchases and are not especially important in what is happening with housing prices.

On another note, Powell said the Fed plans to issue a report on the proposal to issue a digital Dollar.

Tomorrow, Powell is set to testify before the Senate’s Committee on Banking, Housing, and Urban Affairs.