Federal Reserve Chairman Jerome Powell took some heat at the House financial services committee on Wednesday, as both Democrats and Republicans made suggestions of Fed complacency about inflation risks.
Powell Remains Adamant That Inflation Is "Transitory"
As reported by the Financial Times, Powell dismissed suggestions that the central bank might be complacent about the increase in prices, by asserting that he is ready to act when needed to control inflation. He also said he understood public concern over the growing CPI.
“I know people are very worried about inflation,” Powell said. “We hear that loud and clear from everybody… it is really going through the economy and through every business.”
His statements arrive one day after the BLS reported the 5.4% jump of consumer prices in June, and the growing talk of a possible U.S. economy overheating. Still, Powell remained adamant that the inflation phenomenon was transitory and that it would wane in the forthcoming months.
In the hearing, the Fed Chair did not drop any hints on the future of the monetary policy, as he assured that the central bank would continue to discuss in late July the reduction of the $120 billion monthly asset purchases.
But Powell had to deal with fierce questioning by Republican and Democrat lawmakers amid the inflation data released on Tuesday, revealing that prices had turned out higher than the central bank’s initial predictions.
Feeling the Heat
“I’m nervous. How much longer can we sustain numbers like this before you become nervous?” urged Frank Lucas, a Republican lawmaker from Oklahoma.
“I will sleep with one eye open until these numbers begin to come down and if they do not, then I realize, like your predecessors, you’ll have to take the necessary action,” he pressed.
Missouri Republican Ann Wagner reproached the Fed chair by saying, “I can tell you that the families and businesses that I represent… aren’t feeling that these price spikes are very temporary.”
Democrat David Scott expressed his concern as “a return to a more stable inflation rate would be indeed advantageous” and pointed that “wage increases will not keep pace, creating real hardship for people on fixed income, retirees, and low-income households”.
In response to the questions, Powell conceded that the inflation readings “had caught the Fed off-guard so far,” but rested assured that the economy’s “big picture” had not changed.
“It is still the same story. It is still the same parts of the economy that are producing this inflation. It is a pretty narrow group of things that are producing these high readings, but we are anxious like everybody else to see that inflation pass through.”