As prices continue to rise, Federal Reserve Chairman Jerome Powell admitted that “inflation could turn out to be higher and more persistent than we expected,” but he repeated President Joe Biden’s line that there’s nothing to see here. He insisted that inflation indicators “appear broadly consistent” with the Fed’s goal, and he promised that if it truly gets out of hand, the Fed would step in to change policy.
“As the reopening continues, bottlenecks, hiring difficulties, and other constraints could continue to limit how quickly supply can adjust, raising the possibility that inflation could turn out to be higher and more persistent than we expected,” Powell admitted in a press conference on Wednesday.
That said, the Fed chairman insisted that “indicators of long-term inflation expectations appear broadly consistent with our longer-run inflation goal of 2%. If we saw signs that the path of inflation or longer term inflation expectations were moving materially and persistently beyond levels consistent with our goal, we’d be prepared to adjust the stance of policy.”
While “the effects of the [COVID-19] pandemic on the economy have continued to diminish,” Powell warned that “risks to the economic outlook remain.” He noted that “the pace of vaccinations has slowed and the Delta strain of the virus is spreading quickly in some areas. Continued progress on vaccinations would support a return to more normal economic conditions.”