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Powell Highlights Evidence for Transitory Nature of Inflation

FED
  • Now, on "transitory" inflation:
  • As the economy reopens we're seeing upward pressure on prices. Bottlenecks in some sectors have limited how quickly production can be respond. These pressures have been larger than anticipated, but production is expected to return.
  • Oil prices are also increasing, but base effects etc. As reopening continues, 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 expect.
  • Our new framework for monetary policy emphasizes the importance of having well-accurate inflation expectations - both to foster price stability and maximum employment. Our longer term inflation goal is 2% and f we saw signs that 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.
  • Pandemic impact on the economy have continued to diminish, but risks to the outlook remain. Vaccination has limited the spread of COVID-19 and Delta is spreading quickly in some areas. Continued progress on vaccinations would support a return to more normal economic conditions.
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