Powell to Flag 'Upside Risks' to Inflation in Testimony on Hill

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Powell to Flag 'Upside Risks' to Inflation in Testimony on Hill
Credit: © Reuters.

By Yasin Ebrahim

Investing.com - Federal Reserve Chairman Jerome Powell is expected to highlight of "upside risks" to inflation as bottlenecks, hiring difficulties, and other drivers of price pressures continue, but will continue to suggest these pressures will prove transitory, according to prepared remarks ahead of his testimony due Tuesday for the Senate Banking Committee.     

"As reopening continues, bottlenecks, hiring difficulties, and other constraints could again prove to be greater and more enduring than anticipated, posing upside risks to inflation," according to the testimony.  While these effects have been "larger and longer lasting than anticipated, but they will abate, and as they do, inflation is expected to drop back toward our longer-run 2 percent goal."

If, however, the prices pressures prove to be more sustained than expected, and become a serious concern, the Fed would use its "tools to ensure that inflation runs at levels that are consistent with our goal," Powell will say in prepared remarks. 

On the labor market, Powell is expected to say that factors related to the pandemic, such as caregiving needs and ongoing fears of the virus, should "diminish with progress on containing the virus."

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