Here's What Fed Chair Powell Said in His Testimony on Tuesday
Despite a rise in bond yields that has increased inflation concerns among investors, Powell stated that price levels are relatively stagnant and the economic outlook is “highly uncertain.”
“The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved,” the Fed chief said to the Senate Finance Committee. He added that the central bank remains “committed to using our full range of tools to support the economy and to help ensure that the recovery from this difficult period will be as robust as possible.”
Last year, the Fed revised its inflation policy to allow inflation above its 2 percent target before implementing restrictions to quell it.
“Following large declines in the spring, consumer prices partially rebounded over the rest of last year. However, for some of the sectors that have been most adversely affected by the pandemic, prices remain particularly soft,” he said. “Overall, on a 12-month basis, inflation remains below our 2 percent longer-run objective.”
“This change means that we will not tighten monetary policy solely in response to a strong labor market,” Powell said.
Powell also stated that the recent drop in COVID cases and deaths has been promising for the economic outlook.
“While we should not underestimate the challenges we currently face, developments point to an improved outlook for later this year. In particular, ongoing progress in vaccinations should help speed the return to normal activities,” he said. “In the meantime, we should continue to follow the advice of health experts to observe social-distancing measures and wear masks.”