(Kitco News) Federal Reserve Chair Jerome Powell said that transitory inflation has been higher and more persistent than expected, but it will “wane.”
“Substantial part or perhaps all of the overshoot in inflation comes from the impact of reopening of the economy,” Powell told the members of the House Select Subcommittee on the Coronavirus Crisis on Tuesday.
The Fed chair highlighted items such as cars, airplane tickets, hotel prices. “Those are things that we would look to stop going up and ultimately start to decline,” Powell said, while still being unclear on when that might be.
In one cautious similarity to the Fed’s meeting last week, Powell admitted that these temporary effects on inflation “have been higher than we expected, and they may turn out to be more persistent than we expected.”
However, he did state that the incoming data is still consistent with the view that these factors will “wane over time” as the Fed continues to monitor them carefully. “We see strong demand, while the supply side has been caught a little bit flat-footed.”
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