Fed Chair Jerome Powell insisted in a House panel hearing that “we will not raise interest rates preemptively because we fear the possible onset of inflation.” Instead, “we will wait for evidence of actual inflation or other imbalances.” He reiterated that the transitory factors that pushed up inflation should “resolve themselves” in the coming months. And, “they don’t speak to a broadly tight economy and to the kinds of things that have led to higher inflation over time.”
“I will say that these effects have been larger than we expected, and they may turn out to be more persistent than we have expected,” he explained. “But the incoming data are very consistent with the view that these are factors that will wane over time, and inflation will then move down toward our goals and we’ll be monitoring that carefully.”
“You have a central bank that’s committed to price stability and has defined what price stability is and is strongly prepared to use its tools to keep us around 2% inflation,” he said. “All of these things suggest to me that an episode like what we saw in the 1970s … I don’t expect anything like that to happen.”
