Powell says inflation risks rising, but Fed can be ‘patient’
Federal Reserve Chair Jerome Powell said Friday that the tangled supply chains and shortages that have bedeviled the U.S. economy since this summer have gotten worse and will likely keep inflation elevated well into next year.
The Fed is not yet prepared to lift its benchmark interest rate, he said, though he suggested that the economy may be ready for a rate hike next year. “We think we can be patient and allow the recovery to take place and allow the labor market to heal,” he said.
There is now greater risk of “longer and more persistent bottlenecks and thus to higher inflation,” Powell said at a virtual conference hosted by the South African Reserve Bank.
Powell, echoing many economists, has previously said that shortages and higher prices are mostly a result of the pandemic’s impact on supply lines, with factories in Asia temporarily closing amid COVID infections and dozens of cargo ships anchored offshore.
He said Friday that he still thinks those supply problems will be resolved over time, but the Fed will be vigilant and take steps to push inflation back down to its 2% goal if necessary. “No one should doubt that we will use our tools to guide inflation back to 2%,” he said.