Powell acknowledged that the factors that raise inflation in the United States “will continue for a long time next year.” Comments in the briefing to the Senate Banking Committee on Tuesday reflect the Fed’s growing concern about the sharp rise in inflation this year, which he has repeatedly said is temporary.
While stressing that the US economy “continued to thrive,” he pointed out that the re-emergence of the “Corona” epidemic has hampered the recovery since the discovery of the delta mutant in the fall.
Jerome Powell added that “the recent rise in COVID-19 infections and the emergence of the Omicron mutant poses downside risks to employment and economic activity and raises doubts about inflation.”
He added, “The biggest concerns about the virus are related to the possibility that it will reduce people’s desire to work in attendance, which may slow progress in the labor market and increase supply chain disruptions.”
Powell noted that inflation is “significantly above” the Fed’s 2 percent target, which the Fed uses to reach 5 percent over the 12 months through October.
He pointed out that “supply chain problems have made it difficult for producers to meet strong demand, especially for commodities. And increases in energy prices and rents are pushing up inflation.”
While the Federal Reserve still expects “inflation to decline significantly over the next year as supply and demand imbalances recede,” Powell acknowledged that the market’s direction is “difficult to predict.”
Powell pledged to use all of the central bank’s tools to support the recovery and “prevent high inflation from becoming entrenched.”