As prices rise rapidly, Fed chief seeks patience
WASHINGTON — For anyone watching with concern as prices surge for everything from food and gas to airplane tickets and clothes, the message from Federal Reserve Chair Jerome Powell over two days of congressional hearings this week was straightforward: Just give it more time and those price gains should slow, or even reverse.
The Fed chair acknowledged that the U.S. is in the midst of an unparalleled economic reopening on the heels of a pandemic-induced recession, making it that much more difficult to anticipate how things like inflation and unemployment will play out.
“This particular inflation is just unique in history,” Powell said Thursday before the Senate Banking, Housing and Urban Affairs Committee. “We don't have another example of the last time we reopened a $20 trillion economy. We're humble about what we understand.”
Powell gave his twice-a-year monetary policy report to Congress this week. On Wednesday, he appeared before the House Financial Services Committee where he said inflation may slow “in six months or so,” suggesting a clear reading on inflation won't come until the end of the year.
“This is the Fed saying it is prepared to endure a longer period of elevated inflation than just a few months,” Tim Duy, chief U.S. economist at SGH Macro Advisers, a consulting firm, wrote this week.
Powell aimed to soothe senators and members of Congress, with Republicans in particular repeatedly raising the issue of higher prices, often blaming them on President Joe Biden's $1.9 trillion rescue package enacted in March.
The Biden administration has said the recent burst of inflation reflected the nature of restarting the U.S. economy.
White House press secretary Jen Psaki told reporters at a Thursday briefing that supply-chain issues and the shortage of semiconductors are being addressed through legislation and executive actions. The ultimate goal is to increase the supply of available goods, something Psaki said the president's jobs and infrastructure package would help with.
“We understand the threat that inflation poses,” Psaki said. “We will be vigilant.”
On Tuesday, the U.S. reported that prices paid by Americans in June surged more than they have in the past 13 years. Powell acknowledged that the increases have been larger than he — and most economists — anticipated.
