Federal Reserve Chair Jerome Powell continued to attribute most of the recent inflation surge to factors closely tied to the economic reopening reports CNBC
He said it is “very, very unlikely” that a repeat of 1970s-style inflation could happen, primarily because of the Fed’s commitment to price stability.
Committee Republicans repeatedly pressed Powell on whether the economy was headed toward the hyperinflation of that era.
Federal Reserve Chairman Jerome Powell acknowledged Tuesday that some inflation pressures are stronger and more persistent than he had anticipated, though still not on par with some of the worst episodes the U.S. has seen historically.
Under questioning from a special House panel, the central bank leader continued to attribute most of the recent inflation surge to factors closely tied to the economic reopening.
Among them, Powell cited airline tickets, hotel prices and lumber along with generally surging consumer demand pumping up an economy that a year ago faced substantial government-imposed restrictions in the early days of Covid-19.
“They don’t speak to a broadly tight economy and to the kinds of things that have led to higher inflation over time,” he told the House Select Subcommittee on the Coronavirus Crisis. Powell’s mandated testimony provided an economic update and covered the pandemic-related tools Congress gave the Fed during the crisis.
“I will say that these effects have been larger than we expected, and they may turn out to be more persistent than we have expected,” he added. “But the incoming data are very consistent with the view that these are factors that will wane over time, and inflation will then mov “What we’re seeing now, we believe, is inflation in particular categories of goods and services that are being directly affected by this unique historical event that none of us have ever lived through before,” he said.
Powell added that the current situation is being caused by “extremely strong demand for labor, goods and services” compounded by a “supply side caught a little bit flat-footed.” He pledged that the Fed would be vigilant in its role.