Powell Stresses Fed Watching Inflation Expectations Carefully

Q: What are the upside risks to inflation from China and Russia, as those are more supply than demand-side shocks?

• A: Our tools don't work on supply shocks, they work on demand. We can't affect commodity prices but there is a job to do on demand: in the labor market, in the product markets. Ukraine and China likely to add to headline inflation and people will suffer, but they don't tell us much about the future path. They prevent supply chains healing, or to get worse. That affects broader inflation too.

Q: If these supply chain issues continue to play out, does getting to inflation mandate require they get resolved, or will you have to crimp demand even further?

• A: We're focused on doing the job we need to do on demand (again Powell cites huge vacancies in the labor market). We have to make sure that inflation expectations remain anchored. We'll be watching that carefully. It puts any central bank in a very difficult situation.