US inflation is likely to continue to run hot in the coming months, according to the Chairman of the Federal Reserve.
US Federal Reserve Chair Jay Powell said in remarks prepared for the US House of Representatives Financial Services Committee that price rises “will likely remain elevated in coming months”, but will “moderate”.
Powell doubled down on the Fed’s ultra-loose monetary policy stance, saying that it will provide powerful support to the American economy “until the recovery is complete.”
He also said the Fed is prepared to intervene if inflation spirals out of control.
He reiterate that a tapering of the Fed’s $120bn asset purchase programme is still a long way off in a move designed to quash market volatility.
The remarks come as the US posted its highest annual inflation figure since August 2008 yesterday, with prices rising 5.4 per cent in June.
The Fed has incorporated achieving a strong labour market into its scope since the start of the pandemic.
Powell said there was still a long way to go to pull workers on the margin back into the labour force, suggesting that monetary policy will remain accommodative until the US jobs market is robust.
Powell is set be probed about the Fed’s outlook on inflation, the labour market and the economic recovery during two days of testimony in Congress.
US 10-year Treasury yields dipped slightly after Powell’s remarks were published, an indication that bond traders expect the Fed to continue to keep monetary policy ultra-loose and rates low.