Federal Reserve Chair to Testify Before Congress

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When Federal Reserve chairman Jerome H. Powell appears before the Senate Banking Committee on Thursday, he will testify at a tense moment, both politically and economically, given the recent rise in inflation.

Consumer Price Index skyrocketed It was 5.4 percent year-on-year in June, the biggest increase since 2008, and a bigger move than economists had expected. Price pressures seem poised to last longer than policymakers at the White House or the Fed expect.

In Testifying before the House Financial Services Committee on WednesdayPowell attributed the rapid price increases to factors linked to the reopening of the economy from the pandemic, and responded to those who questioned that Fed officials expect inflation to begin to calm down within six months.

He acknowledged that “incoming inflation data are higher than expected and hoped for”, but said the gains came from a “small set” of goods and services directly tied to reopening.

For now, he expressed comfort with the central bank’s relatively patient policy path, even in light of the warmer-than-expected price data. He said the labor market was improving but “still a long way to go”.

He also said the Fed’s goal of making “significant progress” toward its economic goals before taking the first steps toward establishing a more normal policy is “still distant”.

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