Jerome H. Powell, the Federal Reserve chair, faced a second day of questioning about rising inflation during a Senate Banking Committee on Thursday and once again suggested the central bank was in no rush to make rapid changes to policy.
Mr. Powell’s testimony comes at a politically and economically fraught moment, as prices for used cars, rent, restaurant meals and other items rise more rapidly — capturing headlines and eliciting criticism from Republicans. The Consumer Price Index jumped 5.4 percent in June from a year earlier, a report earlier this week showed, the biggest increase since 2008 and a larger move than economists had expected. Price pressures appear poised to last longer than policymakers at the White House or Fed anticipated.
The Fed chair was asked about rising inflation repeatedly during testimony on Wednesday before the House Financial Services Committee, and that continued into Thursday. Patrick J. Toomey, the top Republican on the Senate Banking Committee, was among those who questioned the Fed’s super-supportive monetary policies and raised concerns about inflation.
Mr. Powell has maintained fast price gains are likely to moderate with time, and has attributed rapid pickup to factors tied to the economy’s reopening from the pandemic — a message he reiterated during his testimonies this week. He indicated in response to questioning on Wednesday that Fed officials expected inflation to begin calming in six months or so, and on Thursday, he made clear that the Fed is monitoring the pop carefully.
“It’s not tied to the things that inflation is usually tied to — which is a tight labor market, a tight economy,” Mr. Powell said. “This is a shock going through the system associated with the reopening of the economy, and it’s driven inflation well above 2 percent, and of course we’re not comfortable with that.”
He added that “the challenge we’re confronting is how to react to this inflation, which is larger than we had expected, or than anyone had expected.”
“To the extent that it is temporary, then it wouldn’t be appropriate to react to it,” he said. “But to the extent that it gets longer and longer, we’ll have to continue to re-evaluate the risks that would affect inflation expectations.”
But for now, he voiced comfort with the central bank’s relatively patient policy path even in light of the hotter-than-expected price data. The Fed is hoping to see more labor market progress before pulling back its monetary policy support, which includes both $120 billion in monthly government-backed bond purchases and rock-bottom interest rates.
“We’re noting that there’s still an elevated level of unemployment,” Mr. Powell said when asked why those policies remained in place.
The Fed is discussing when and how to slow its bond purchases, he said. Economists expect that they could begin to do so later this year or early next. Rate increases are not yet under consideration, and most officials did not expect to raise borrowing costs from rock-bottom before 2023, as of their June economic projections.
Mr. Powell has also been clear that the Fed would move faster if necessary.
“We’re humble about what we understand,” Mr. Powell said on Thursday.