Fed chief hints patience at House panel

Jerome Powell, the Federal Reserve chairman, said Wednesday that it could take years for the central bank to coax weak inflation sustainably higher and reiterated that the labor market would take time to fully heal from the pandemic downturn.

Powell’s comments, delivered during testimony before the House Financial Services Committee, reinforced that the central bank would be extremely patient in slowing down its policy support as it tried to help to fuel a complete recovery.

Powell has been pledging for the past 11 months that the Fed would do whatever it could to get the economy through the pandemic, but his comments have become noteworthy at a time when some lawmakers — in particular Republicans — have become worried that big government spending could fuel economic overheating that leads to rapid inflation.

Fed officials have been clear that weak price gains, not outof-control ones, are the problem of the modern era. Powell doubled down on that message Wednesday. Central bankers try to keep price gains from slipping ever lower, because disinflation can be economically damaging. The Fed targets low, but stable, increases, shooting for 2% annual gains on average over time.

“We live in a time when there are significant disinflationary pressures around the world,” Powell said Wednesday, and so officials are trying to bolster prices. “We believe we can do it; we believe we will do it. It may take more than three years.”

That’s consistent with the Fed’s published economic expectations, but it reinforces how patient the central bank is likely to be in the years ahead. Economists broadly expect a temporary jump in prices this year, but Powell has been clear that a short-term jump is different from sustained higher inflation.

The Fed is using its policies to try to guide the economy back to health. Besides buying huge quantities of bonds, the Fed has also held interest rates near zero since March. The central bank has said it wants to see specific progress toward its two goals — maximum employment and stable prices — before removing that support.

He acknowledged that the criteria for slowing bond purchases was more subjective and based on whether the Fed saw “substantial” further progress. “We’ve been very specific with liftoff,” Powell said. “We’d need to see labor market conditions that are consistent with maximum employment, inflation at 2%, and inflation expected to move moderately above 2% for some time.”

Powell has noted recently that, while the official U.S. unemployment rate in January dropped to 6.3%, the actual rate is closer to 10% when taking into account the millions of people who have given up looking for a job.

In many cases, the jobs people left may no longer be there, which will mean those workers will need access to job retraining to find work in other areas, Powell said.