Fed’s Powell Says Inflation Is Elevated but Likely to Moderate

Federal Reserve Chairman Jerome Powell says in his prepared remarks that supply-chain bottlenecks have lasted longer than expected.

Photo: Michael Nagle/Bloomberg News

Sept. 27, 2021 4:31 pm ET

Inflation is likely to stay high in the coming months before moderating, Federal Reserve Chairman Jerome Powell is set to tell Congress at a hearing on Tuesday morning.

In testimony released by the central bank on Monday, Mr. Powell largely repeated remarks he made at a news conference last week after the central bank indicated it was likely to begin reversing its easy-money policies at its next meeting, Nov. 2-3.

A surge in inflation because of supply-chain bottlenecks and other challenges related to the reopening of the economy has been larger and longer-lasting than anticipated, Mr. Powell said in his prepared remarks. “But they will abate, and as they do, inflation is expected to drop back toward” the Fed’s 2% goal, Mr. Powell said.

Mr. Powell acknowledged that there are risks that price pressures are higher than anticipated or more enduring. The Fed would raise interest rates “if sustained higher inflation were to become a serious concern,” he said.

Mr. Powell strongly indicated last week the Fed could start to reduce, or taper, its $120 billion in monthly asset purchases as soon as its next scheduled meeting and that it could complete that process by the middle of next year.

Mr. Powell is set to testify alongside Treasury Secretary Janet Yellen at Tuesday’s hearing before the Senate Banking Committee as part of quarterly hearings mandated by the March 2020 economic-relief measures that turbocharged the central bank’s emergency lending programs.

The Fed ended those programs at the start of this year, and the central bank by the end of August had sold all of the corporate bonds and related assets it purchased last year to backstop business-lending markets.

The U.S. inflation rate reached a 13-year high recently, triggering a debate about whether the country is entering an inflationary period similar to the 1970s. WSJ’s Jon Hilsenrath looks at what consumers can expect next.

Write to Nick Timiraos at [email protected]

Appeared in the September 28, 2021, print edition as ‘Powell Says Inflation to Moderate.’

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Federal Reserve Chairman Jerome Powell says in his prepared remarks that supply-chain bottlenecks have lasted longer than expected.Nick Timiraos