WASHINGTON — Federal Reserve Chair Jerome Powell said Wednesday that inflation, which has been surging as the recovery strengthens, “will likely remain elevated in coming months” before “moderating.”
At the same time, in testimony to the House Financial Services Committee, Powell signaled no imminent change in the Fed’s ultra-low-interest rate policies.
The Fed chairman reiterated his long-held view that high inflation readings over the past several months have been driven largely by temporary factors, notably supply shortages and rising consumer demand as pandemic-related business restrictions are lifted.
Still, House members peppered Powell with questions about rising inflation in recent months, with some expressing concern that prices will continue to accelerate. The Fed chair replied that the central bank would not respond to short-term price spikes by raising rates and risk weakening the economic recovery.
“By inflation, we mean year after year after year prices go up,” Powell said. “If something is a one-time price increase… you wouldn’t react to something that is likely to go away.”
“We really do believe,” he added, “that these things will come down of their own accord.”
Powell’s remarks coincided with rising concerns, among economists as well as ordinary households, that intensifying inflation pressures are creating a burden for many people and posing a potential threat to the recovery from the pandemic recession.
On Wednesday, the government reported that wholesale prices, which businesses pay, jumped 7.3% in June from a year earlier. It was the fastest such 12-month increase on records dating to 2010.
And on Tuesday, the government said that prices paid by U.S. consumers surged in June by the most in 13 years. It was the third straight month that consumer inflation has jumped.