Fed’s Powell: Reopening Economic Bottlenecks Could Be “More Lasting”


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FILE PHOTO: Federal Reserve Chairman Jerome Powell testifies during a hearing of the United States House Oversight and Reform Subcommittee on the coronavirus crisis, on Capitol Hill in Washington, US United, June 22, 2021. Graeme Jennings / Pool via REUTERS / File Photo

WASHINGTON (Reuters) – Rising prices and hiring difficulties seen as US economy reopens after pandemic could prove “more lasting than expected”, and Federal Reserve to oppose inflation if necessary uncontrolled, Fed Chairman Jerome Powell said in remarks prepared for submission to the Senate Banking Committee on Tuesday.

“The process of reopening the economy is unprecedented, and so is the shutdown. As the reopening continues, bottlenecks, hiring difficulties and other constraints could again prove to be greater and more lasting than expected, posing upside risks to inflation, ”he said. Powell said in the remarks, which were released Monday. “If higher and sustained inflation became a serious concern, we would certainly react and use our tools to ensure that inflation is reaching levels consistent with our target.”

Powell’s testimony also reiterated key points from last week’s Fed policy meeting, including that strong economic growth is expected to continue this year even though parts of the economy have been slowed by the soaring surge this summer. of the variant of the Delta coronavirus.

The Fed said last week that as the economy progressed, it was approaching the point where it could start cutting back on its monthly bond purchases, a first step towards returning US monetary policy to a lower base. normal after 18 months of battling the impact of the coronavirus pandemic.

Tuesday’s hearing will be the banking committee’s final review of the Fed and the government’s response to the coronavirus.

It comes at a more sensitive time for Powell, however, with President Joe Biden now pondering his possible reappointment for another four-year term at the Fed, and now an intensifying ethical controversy.

On Monday, the chairmen of two regional Federal Reserve banks announced their impending retirements amid criticism of their active investment operations in 2020.

A key Democratic committee, Massachusetts Senator Elizabeth Warren, was particularly critical and called for stricter ethical rules at the Fed.

Reporting by Howard Schneider; Editing by Chizu Nomiyama and Andrea Ricci

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