WASHINGTON (AFP) – The threat of “persistently high inflation” has risen and the United States central bank will consider removing stimulus more quickly, Federal Reserve chairman Jerome Powell said on Tuesday (Nov 30).
Mr Powell has for months described the burst of inflation fuelled by supply chain snarls and shortages of goods and workers as “transitory,” but told the Senate Banking Committee it is time to “retire” the term.
The central bank’s preferred price gauge saw a surge of 5 per cent for the 12 months ending in October, well above the Fed’s 2 per cent goal.
“Clearly, the risk of more persistent inflation has risen,” Mr Powell told lawmakers.
But he said the Fed “will use our tools to make sure that higher inflation does not become entrenched”.
The Fed already has begun to pull back on its stimulus measures put in place to buffer the economy from the pandemic hit, but Mr Powell has previously said policymakers can be patient before raising lending rates, and argued the supply issues will be resolved in the coming months.
However, he signalled in his testimony that it may be appropriate to speed up the pace of the pullback in monthly asset purchases.
That would mean the Fed would be in a position to raise the benchmark interest rate sooner.