His remarks suggest that while the central bank still sees the pace of price increases as temporary, they could last a while. Treasury Secretary Janet Yellen said in May that she expects inflation to remain elevated through the end of the year.
On Tuesday, the Labor Department reported that the consumer price index rose 5.4 percent in June from the same month the previous year, the biggest jump since 2008 and higher than expected, feeding fears that the Fed might have to intervene sooner than projected.
In his testimony, Powell reiterates that the Fed would begin removing some of its economic support “if we saw signs that the path of inflation or longer-term inflation expectations were moving materially and persistently beyond levels consistent with our goal” of an average 2 percent inflation over time.
However, he gave no sign that the central bank is planning to act imminently to slow its massive purchases of U.S. government debt and mortgage-backed securities, saying the country is “still a ways off” from making enough progress toward the central bank’s goals, which include maximum employment.
Despite record-high job openings, the unemployment rate was 5.9 percent in June, “and this figure understates the shortfall in employment,” given how several people are on the sidelines of the workforce right now, he says.
“Job gains should be strong in coming months as public health conditions continue to improve and as some of the other pandemic-related factors currently weighing them down diminish,” according to Powell.