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Jay Powell, the chair of the Federal Reserve, said the US central bank was ready to intervene if inflation spiralled out of control, but stressed that he expected price increases to ease later in the year.
“Inflation has increased notably and will likely remain elevated in coming months before moderating,” Powell told the House of Representatives financial services committee during a hearing on Wednesday.
He added that the Fed “would be prepared to adjust the stance of monetary policy as appropriate if we saw signs that the path of inflation or longer-term inflation expectations were moving materially and persistently beyond levels consistent with our goal”.
Powell’s comments came in the wake of data showing the US consumer price index rose 5.4 per cent in June compared with a year ago, which revived concerns that the US economy may be overheating.
The figures could raise pressure on the US central bank to more rapidly begin the process of slowing the large doses of monetary support it delivered to the economy during the pandemic, starting with a reduction of the $120bn in monthly asset purchases.
Although Powell noted the higher inflation figures and insisted the Fed would not be complacent about rising prices, he stuck to his view that the inflation surge was largely temporary, which is shared by many central bank officials.