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Home Economy

Powell: ‘Patience’ to Characterize Fed’s Monetary Policy Approach

July 14, 2021
Reading Time: 1 min read

Testifying before House lawmakers today, Federal Reserve Chairman Jerome Powell maintained that the Fed’s overall monetary policy stance remains “appropriate” even amid rising inflation concerns, and that “patience” will characterize the agency’s approach moving forward. He noted that the Fed is prepared to respond quickly if prices begin to rise faster than anticipated or if inflation persists for a longer period of time.

Powell observed that “very high inflation readings are coming from a small group of goods and services that are directly tied to the re-opening of the economy,” such as new and used cars, airfare and hotel rooms. He added that “if we were to see that inflation were remaining high and remaining materially higher above our target for a period of time and it was threatening to uproot inflation expectations and create a risk of a longer period of inflation, we would absolutely change our policy as appropriate.”

“If we do see inflation expectations are moving up or inflation is on a path to remain well above our goals. . . then we’ll use our tools to guide inflation back down to 2%,” Powell assured lawmakers. However, “it would be a mistake to do it at a time when we really do believe . . . that these things will come down of their own accord as the economy reopens. It would be a mistake to act prematurely,” he said. Turning to employment, Powell noted that labor market conditions have improved over the first half of 2021, but still have “a long way to go.” However, he expressed his view that “there’s every reason to think that we can get back to 3.5% unemployment.”

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