By Ann Saphir
(Reuters) – The U.S. economy is going to temporarily see “a little higher” inflation this year as the economy strengthens and supply constraints push up prices in some sectors, but the Federal Reserve is committed to keeping any overshoot within limits, Fed Chair Jerome Powell said in an April 8 letter.
“We do not seek inflation that substantially exceeds 2 percent, nor do we seek inflation above 2 percent for a prolonged period,” Powell told Senator Rick Scott in a five-page letter responding to a March 24 letter from the Florida Republican raising concerns about rising inflation and the Fed’s bond buying program. “I would emphasize, though, that we are fully committed to both legs of our dual mandate – maximum employment and stable prices.”
Scott, while not on the Senate Banking Committee that directly oversees the Fed, nonetheless has been a vocal critic of Powell. He has warned that the Fed’s low interest rates and bond-buying program will force prices higher, hurting families and businesses.
His office provided Powell’s letter to Reuters, and suggested the response did not allay the senator’s concerns.
“The data is clear that inflation is rising, and Chair Powell continues to ignore this growing problem,” Scott’s office told Reuters in the email. “Senator Scott remains concerned about the impact inflation will have on low and fixed-income American families, like his growing up. He is calling on Chair Powell to wake up to this threat, lay out a clear plan to address rising inflation and protect American families.”
Powell in his letter said that low inflation constrains the Fed’s ability to offset economic shocks with easy policy, and that after a decade of too-low inflation, the Fed is now aiming for inflation moderately above 2%.
“We understand well the lessons of the high inflation experience in the 1960s and 1970s, and the burdens that experience created for all Americans,” Powell said in the letter. “We do not anticipate inflation pressures of that type, but we have the tools to address such pressures if they do arise.”
(Reporting by Ann Saphir; Editing by Chizu Nomiyama and Dan Burns)
