Federal Reserve Chairman Jerome Powell is vowing to prevent the inflation from becoming “entrenched” as prices rise in the U.S.
Powell will tell senators during his confirmation hearing, which begins at 10 a.m. on Tuesday, that the initial shutdown triggered by the COVID-19 pandemic and the eventual reopening of the economy were both “without precedent,” noting that the quick revival of the marketplace led to “persistent supply and demand imbalances and bottlenecks, and thus to elevated inflation.”
Now, however, Powell says the Fed will work to ensure that the inflation spike does not become permanent.
“We know that high inflation exacts a toll, particularly for those less able to meet the higher costs of essentials like food, housing, and transportation,” Powell will say in his opening statement, according to a copy of the remarks published prior to his appearance.
“We are strongly committed to achieving our statutory goals of maximum employment and price stability,” he will add.
“We will use our tools to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched.”
Powell is scheduled to appear before the Senate Banking Committee to field questions from lawmakers on his renomination to lead the central bank. President Biden renominated him to the post in November.
Powell was first appointed Fed chairman by former President Trump in 2017. Before that, he was a member of the Federal Reserve Board of Governors, a position he was nominated to by former President Obama.
Inflation concerns are expected to dominate part of Powell’s confirmation hearing. The consumer price index, which tracks inflation for a handful of sample goods and services, increased by 6.8 percent in the 12-month period ending in November, the highest rate the U.S. has seen since 1982.
Biden administration officials for some time had been saying that inflation would be “transitory,” meaning the price increases nationwide would be temporary. Last month, however, Powell signaled a shift, saying during a congressional hearing that it “is no longer my view” that price spikes are temporary, according to CNN.
He also clarified that the Fed’s use of the word “transitory” refers to inflation not inflicting permanent damage on the economy once the current phase has passed, the network reported.
Biden on Friday said he is “confident” that the Fed will percent price spikes from becoming entrenched.
“I’m confident that the Federal Reserve will act to achieve their dual goals of full employment at stable prices and make sure that price increases do not become entrenched over a long term with the independence that they need,” the president said.