NATIONAL NEWS

Fed’s Powell Says High Inflation Temporary, Will ‘Wane’

Jun 23, 2021, 5:34 AM
Federal Reserve Chair Jerome H. Powell announces a half percentage point interest rate cut during a...
Federal Reserve Chair Jerome H. Powell announces a half percentage point interest rate cut during a speech on March 3, 2020 in Washington, DC. (Photo by Mark Makela/Getty Images)
(Photo by Mark Makela/Getty Images)

WASHINGTON (AP) — Federal Reserve Chair Jerome Powell on Tuesday responded to concerns from Republican lawmakers about spiking inflation by reiterating his view that current price increases will likely prove temporary.

Consumer prices jumped 5% in May compared with a year earlier, the largest increase in 13 years. Republican House members have sought to blame higher inflation on President Joe Biden’s $1.9 trillion economic relief package, approved in March, in an effort to retake the House next year.

“The Biden inflation agenda of too much money chasing too few goods is causing major harm to hardworking families,” said Louisiana Rep. Steve Scalise, the second-ranking Republican House leader.

Powell avoided participating in such policy debates, despite attempts from both Democrats and Republicans to draw him in.

But he said in testimony before a congressional oversight panel that recent price gains mostly reflected temporary supply bottlenecks, and the fact that prices fell sharply last spring at the onset of the pandemic, which make inflation figures now, compared with a year ago, look much larger.

Most of the price gains have occurred in categories such as used cars, airplane tickets, and hotel rooms, Powell said, where demand has soared as the economy has quickly reopened, catching many companies flat-footed.

“Those are things that we would look to, to stop going up and ultimately to start to decline as these situations resolve themselves,” Powell said. “They don’t speak to a broadly tight economy — the kind of thing that has led to high inflation over time.”

Powell acknowledged that “these effects have been larger than we expected and they may turn out to be more persistent than we expected.” But he added that “the incoming data are very much consistent with the view that these are factors that will wane over time and then inflation will then move down toward our goals.”

The Fed chair did not specify which data he was referring to, but the prices of many commodities, such as lumber and copper, which had risen sharply during the pandemic, have tumbled in recent weeks.

Powell’s comments come at a time when financial markets are struggling to interpret the Federal Reserve’s recent moves. Last week Fed officials signaled that they may increase the central bank’s benchmark interest rate twice in 2023, an earlier time frame than they set out in March, when no rate hike was expected until after that year. Changes to the Fed’s benchmark rate affect a wide range of consumer borrowing costs, such as mortgages, credit cards, and student loans.

Powell also said last week that the Fed had formally begun discussing when and how the central bank might reduce the current $120 billion a month of Treasurys and mortgage-backed bonds that the Fed is purchasing. Those purchases are intended to keep longer-term interest rates lower to encourage more borrowing and spending.

Both moves were seen as evidence that the Fed wanted to indicate it was prepared to keep inflation in check without initially taking any steps to pull back on its efforts to stimulate the economy.

Some Fed officials are not fully convinced that inflation is temporary. St. Louis Fed President James Bullard said Monday that the economy is in unprecedented territory, making it hard to know where inflation will go next. But he added that, “we have to be ready for the idea that there are upside risks to inflation, (it) could go higher” than the 2.5% rate he has forecast for next year.

Yet other officials echoed Powell’s views. Also on Monday, New York Federal Reserve Bank President John Williams, who also serves as vice chair of the Fed’s policymaking committee, said that currently high inflation is likely transitory.

“I expect that as price reversals and short-run imbalances from the economy reopening play out, inflation will come down from around 3% this year to close to 2% next year and in 2023,” Williams said.

KSL 5 TV Live

Top Stories

National News

FILE: In this photo illustration, the TikTok app is displayed on an Apple iPhone on August 7, 2020 ...
Brian Fung, CNN

FCC commissioner calls on Apple, Google to remove TikTok from app stores

A member of the Federal Communications Commission is renewing calls for Apple and Google to remove TikTok from their app stores, citing national security concerns surrounding TikTok's Chinese-based parent company, ByteDance.
7 hours ago
A package of Plan B contraceptive is displayed at Jack's Pharmacy on April 5, 2013 in San Anselmo, ...
HALELUYA HADERO, ASSOCIATED PRESS

Amazon, Rite Aid cap purchase of emergency contraceptives

Amazon is limiting how many emergency contraceptives consumers can buy, joining other retailers who put in place similar caps following the Supreme Court decision overruling Roe v. Wade.
1 day ago
Guns of many varieties are organized by type and caliber for use in training, and to fix malfunctio...
DON THOMPSON, Associated Press

Personal info on California gun owners wrongly made public

The California Department of Justice says it wrongly made public the personal information of hundreds of thousands of gun owners in their state-operated databases.
1 day ago
The American Heart Association added sleep duration to its cardiovascular health checklist. It's a ...
Megan Marples, CNN

Sleep duration matters for heart health, according to new recommendations

If you needed another reason to get enough sleep, here it is: It may help your heart health.
1 day ago
FILE: Former President Donald Trump speaks at a rally on September 25, 2021 in Perry, Georgia. Repu...
MICHAEL R. SISAK, Associated Press

Judge ends Trump contempt order after lengthy legal fight

A New York judge has ruled that former President Donald Trump is no longer in contempt of court.
1 day ago
FILE (Getty Images)...
Associated Press

Police: Virginia toddler left in car dies, father kills self

A toddler accidentally left in a vehicle for hours died Tuesday and police said his father was found dead in an apparent suicide at their Virginia home.
1 day ago

Sponsored Articles

hand holding 3d rendering mobile connect with security camera for security solutions...
Les Olson

Wondering what security solutions are right for you? Find out more about how to protect your surroundings

Physical security helps everyone. Keep your employees, clients, and customers safe with security solutions that protect your workplace.
Many rattan pendant lights, hay hang from the ceiling.Traditional and simple lighting....
Lighting Design

The Best Ways to Style Rattan Pendant Lighting in Your Home

Rattan pendant lights create a rustic and breezy feel, and are an easy way to incorporate this hot trend into your home decor.
Earth day 2022...
1-800-GOT-JUNK?

How Are You Celebrating Earth Day 2022? | 4 Simple Ways to Celebrate Earth Day and Protect the Environment

Earth Day is a great time to reflect on how we can be more environmentally conscious. Here are some tips for celebrating Earth Day.
Get Money Online...

More Ways to Get Money Online Right Now in Your Spare Time

Here are 4 easy ways that you can get more money online if you have some free time and want to make a little extra on the side.
Lighting trends 2022...

Lighting Trends 2022 | 5 Beautiful Home Lighting Trends You Can Expect to See this Year and Beyond

This is where you can see the latest lighting trends for 2022 straight from the Lightovation Show at the Dallas World Trade Center.
What Can't You Throw Away in the Trash...

What Can’t You Throw Away in the Trash? | 5 Things You Shouldn’t Throw in to Your Trash Can

What can't you throw away in the trash? Believe it or not, there are actually many items that shouldn't be thrown straight into the trash.
Fed’s Powell Says High Inflation Temporary, Will ‘Wane’