In a speech to the Senate Banking Committee, he said economic growth “continued to strengthen” but was met with upward price pressures stemming from supply chain bottlenecks and other factors.
“Inflation is high and will likely remain so in the coming months before it subsides,” Powell said.
He added that as the economy continues to open and spending picks up, we will see upward pressure on prices, particularly due to supply bottlenecks in some sectors.
That these effects are larger and longer lasting than expected, but will subside, and that inflation is expected to decline again towards our long-term target of 2%.
These comments are part of the testimony that Powell must submit to Congress regarding the Fed’s response to the coronavirus pandemic, and he will speak Wednesday before the House Financial Services Committee.
After meeting last week, the Fed indicated that it will soon begin to roll back some of the stimulus it provided during the crisis.
However, officials stressed that reducing monthly asset purchases did not amount to a looming interest rate hike.
“We at the Fed will do everything we can to support the economy as long as it takes to complete the recovery,” Powell said.