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MNI BRIEF: Powell Sees 'Challenge' Reacting to Transitory CPI

WASHINGTON (MNI)

Federal Reserve Chair Jerome Powell told lawmakers Thursday officials are still sorting out how much of the recent spike in inflation may persist and thus become problematic -- and watching expectations closely to determine how to respond.

"The challenge that we're confronting is how to react to this inflation which is larger than we had expected or that anybody had expected," Powell said. "And to the extent it is temporary it would not be appropriate to react to it. To the extent that it gets longer and longer we'll have to continue to reevaluate the risk that it will affect inflation expectations and be of longer duration."

Ex-Fed officials and staffers tell MNI they are increasingly concerned about the latter scenario where higher inflation expectations might become entrenched as the Fed promises to look through strong readings.

MNI Washington Bureau | +1 202 371 2121 | pedro.dacosta@marketnews.com

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