Powell Says Inflation Risks Rising, but Fed Can Be ‘Patient’

Federal Reserve Chair Jerome Powell said Friday that the tangled supply chains and shortages that have bedeviled the U.S. economy since this summer have gotten worse and will likely keep inflation elevated well into next year.

But the Fed is not yet prepared to lift its benchmark interest rate, he said.

There is now greater risk of “longer and more persistent bottlenecks and thus to higher inflation,” Powell said at a virtual conference hosted by the South African Reserve Bank.

Powell, echoing many economists, has previously said that shortages and higher prices are mostly a result of the pandemic’s impact on supply lines, with factories in Asia temporarily closing amid COVID infections and dozens of cargo ships anchored offshore.

He said Friday that he still thinks those supply problems will be resolved over time, but the Fed will be vigilant and take steps to push inflation back down to its 2% goal if necessary.

“No one should doubt that we will use our tools to guide inflation back to 2%,” he said.

Consumer prices, according to the Fed’s preferred gauge, jumped 4.3% in August from a year earlier, the fastest such increase in three decades.

The Fed chair said he is ready to taper, or reduce, the central bank’s $120 billion in monthly bond purchases, which are intended to lower longer-term interest rates and encourage borrowing and spending.

But he added that it would be “premature” to raise the Fed’s short-term interest rate, because the job market needs more time to recover. Powell noted that there are still 5 million fewer jobs in the U.S. than before the pandemic.

“We think we can be patient and allow the recovery to take place and allow the labor market to heal,” he said.

© Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

There is no custom code to display.

Blogs

670 KBOI GUEST BLOG: Governor Brad Little

670 KBOI GUEST BLOG: Governor Brad Little

Biden’s vaccine mandate is not the solution By Governor Brad Little Americans are deeply divided on COVID-19 and the response to it. Public health has turned political, there’s no doubt about it. But the situation playing out in hospitals across the country isn’t up for debate. There are more patients in need of critical care…

670 KBOI GUEST BLOG: Governor Brad Little

670 KBOI GUEST BLOG: Governor Brad Little

670 KBOI GUEST BLOG: Governor Brad Little Idaho to help secure U.S.-Mexico border because Biden won’t July 7, 2021 Last week I announced my plan to send Idaho State Police (ISP) troopers to Arizona to help secure the United States-Mexico border and curb the flow of illegal drugs into Idaho due to failed Biden-Harris immigration…

670 KBOI GUEST BLOG: Speaker of the House Scott Bedke

670 KBOI GUEST BLOG: Speaker of the House Scott Bedke

670 KBOI GUEST BLOG: Speaker of the House Scott Bedke   Happy Birthday, Idaho – Let’s Celebrate and Maintain the Idaho Way BY: Speaker of the House Scott Bedke, Oakley There is no better place to live, work, and raise a family than Idaho. As a proud Idaho native who believes, promotes and lives our…