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By Christopher Rugaber<\/div><\/div>\n

Over two days of Congressional testimony, Fed Chair Powell held to his belief that inflation is a temporary concern: Over time, it will fade and perhaps even reverse.<\/span><\/span><\/p>\n<\/div>\n

WASHINGTON (AP) \u2013 For anyone watching with concern as prices surge for everything from food and gas to airplane tickets and clothes, the message from Federal Reserve Chair Jerome Powell over two days of congressional hearings this week was straightforward: Just give it more time and those price gains should slow, or even reverse.<\/span><\/span><\/p>\n

The Fed chair acknowledged that the U.S. is in the midst of an unparalleled economic reopening on the heels of a pandemic-induced recession, making it that much more difficult to anticipate how things like inflation and unemployment will play out.<\/span><\/span><\/p>\n

\u201cThis particular inflation is just unique in history,\u201d Powell said Thursday before the Senate Banking, Housing and Urban Affairs Committee. \u201cWe don\u2019t have another example of the last time we reopened a $20 trillion economy. We\u2019re humble about what we understand.\u201d<\/span><\/span><\/p>\n

Powell gave his twice-a-year monetary policy report to Congress this week. On Wednesday, he appeared before the House Financial Services Committee where he said inflation may slow \u201cin six months or so,\u201d suggesting a clear reading on inflation won\u2019t come until the end of the year.<\/span><\/span><\/p>\n

\u201cThis is the Fed saying it is prepared to endure a longer period of elevated inflation than just a few months,\u201d Tim Duy, chief U.S. economist at SGH Macro Advisers, a consulting firm, wrote this week.<\/span><\/span><\/p>\n

Powell aimed to soothe senators and members of Congress, with Republicans in particular repeatedly raising the issue of higher prices, often blaming them on President Joe Biden\u2019s $1.9 trillion rescue package enacted in March. The Biden administration has said the recent burst of inflation reflected the nature of restarting the U.S. economy.<\/span><\/span><\/p>\n

White House press secretary Jen Psaki told reporters at a Thursday briefing that supply-chain issues and the shortage of semiconductors are being addressed through legislation and executive actions. The ultimate goal is to increase the supply of available goods, something Psaki said the president\u2019s jobs and infrastructure package would help with.<\/span><\/span><\/p>\n

\u201cWe understand the threat that inflation poses,\u201d Psaki said. \u201cWe will be vigilant.\u201d<\/span><\/span><\/p>\n

On Tuesday, the U.S. reported that prices paid by Americans in June surged more than they have in the past 13 years. Powell acknowledged that the increases have been larger than he \u2013 and most economists \u2013 anticipated.<\/span><\/span><\/p>\n

He attributed the gains to a narrow set of industries that were hit hard by soaring demand and in many cases, severe supply shortages, as the nation emerged from the worst of the pandemic.<\/span><\/span><\/p>\n

\u201cIt\u2019s airplane tickets, it\u2019s hotel rooms and it\u2019s a handful of other things, and they account for essentially all of the overshoot,\u201d Powell said. \u201cWe think that those things are clearly temporary. We don\u2019t know when they\u2019ll end, but they\u2019ll go away.\u201d<\/span><\/span><\/p>\n

Powell conceded that there are forces that could emerge that would continue to lift inflation, though he did not name any. Some economists worry that rising home prices and rents could act as a longer-term boost to consumer prices. But Powell said the Fed is monitoring price trends closely and will react to any such changes.<\/span><\/span><\/p>\n

\u201cWe won\u2019t have to wait a tremendously long time, I don\u2019t think, to know whether our basic understanding of this is right,\u201d he said.<\/span><\/span><\/p>\n

Kathy Bostjancic, an economist at Oxford Economics, said that because Powell referred several times to a six-month timeframe, it \u201cseems by then he will judge if indeed it\u2019s temporary or more permanent.\u201d<\/span><\/span><\/p>\n

The Fed has said it will keep its benchmark short-term interest rate pegged near zero until it believes maximum employment has been reached and annual inflation moderately exceeds 2% for some time. The central bank\u2019s policymakers have said they\u2019re prepared to accept inflation above its target to make up for years of inflation below 2%.<\/span><\/span><\/p>\n

Powell acknowledged Thursday that inflation is currently well above 2%, adding \u201cof course we\u2019re not comfortable with that.\u201d But he noted that unemployment also remains elevated at 5.9%, and argued that the Fed doesn\u2019t want to raise interest rates to counter what it sees as temporarily higher prices.<\/span><\/span><\/p>\n

The Fed is also purchasing $120 billion a month in Treasurys and mortgage-backed securities, which are intended to keep longer-term interest rates low to encourage borrowing and spending. The Fed has started discussing its timeframe for reducing those bond buys, Powell said, and will continue to do so at its next meeting in two weeks.<\/span><\/span><\/p>\n

Some economists believe that the Fed will likely announce a reduction in those purchases as soon as September, though others argue a November or December announcement is more likely.<\/span><\/span><\/p>\n

Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission. AP Writer Josh Boak contributed to this report.<\/span><\/span><\/p>\n<\/div><\/div>\n

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\nAuthor: kerrys<\/p>\n","protected":false},"excerpt":{"rendered":"