“Overall inflation is running well above target,” Mr. Powell said at a virtual Bank for International Settlements-South African Reserve Bank conference on Friday.
The Fed's view is that those pressures are likely to abate as people shift spending back to services, but supply constraints are “likely to last longer than previously expected, likely well into next year,” and the same is true for pressure on wages, he said.
It’s the “most likely case” that as they resolve, and as job gains move up, inflation will move back down toward the Fed’s 2 percent goal, he said.
“In the meantime, the risk is that high inflation will begin to lead price and wage setters to expect unduly high rates” of inflation in the future, Mr. Powell said.
If inflation was at risk of staying persistently high, “we would certainly use our tools to preserve price stability, while also taking into account our maximum employment goal.”
Jerome H, Powell, Mr, ”
Federal Reserve, Bank, International, African Reserve Bank, Fed, “