WASHINGTON (AP) – Federal Reserve Chair Jerome Powell said Thursday current high levels of inflation are likely to fade next year and won’t prevent the Fed from pushing toward its goal of full employment.
Powell spoke earlier this week about “tension” between the Fed’s two goals of maximum employment and keeping prices stable. In periods of high unemployment, inflation is typically low, and vice versa. But right now inflation has jumped above the Fed’s 2% target while the unemployment rate remains elevated, at 5.2%.
That can complicate the Fed’s mission, because keeping its benchmark short-term interest rate low – it is currently pegged near zero – can help boost hiring, but it could also allow inflation to worsen.
In comments before the House Financial Services Committee, however, Powell said he believes inflation will decline without higher rates from the Fed raising.
Current inflation “is a function of supply side bottlenecks over which we have no control,” Powell said. “But I would say that we do expect in the first half of next year to see some relief, depending on the bottleneck in question, and inflation should move down.”