MNI: Powell Says Fed To Prevent Entrenched Higher Inflation

Federal Reserve Chair Jerome Powell on Monday said he stands ready to prevent elevated inflation from becoming entrenched.

"The economy is expanding at its fastest pace in many years, and the labor market is strong," Powell said in testimony for delivery Tuesday at the Senate Banking Committee and released Monday by the Fed. "The economy has rapidly gained strength despite the ongoing pandemic, giving rise to persistent supply and demand imbalances and bottlenecks, and thus to elevated inflation."

"We are strongly committed to achieving our statutory goals of maximum employment and price stability. We will use our tools to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched," he said in the prepared remarks. "We know that high inflation exacts a toll, particularly for those less able to meet the higher costs of essentials like food, housing, and transportation."

Powell is expected to win a second term leading the central bank but must first face lawmakers at his Senate confirmation hearing after only weeks ago pivoting to tighten policy to combat inflation. Members of the FOMC in December penciled three quarter-point rate increases this year and some officials have said that could start in March.

"We can begin to see that the post-pandemic economy is likely to be different in some respects. The pursuit of our goals will need to take these differences into account. To that end, monetary policy must take a broad and forward-looking view, keeping pace with an ever-evolving economy."