© Reuters. FILE PHOTO: Senate Banking Committee hearing on Capitol Hill in Washington
By Ann Saphir
(Reuters) – The US economy is set to experience “slightly higher” inflation temporarily this year as the economy intensifies and supply constraints drive prices up in some sectors. However, the Federal Reserve is keen to contain overshoot, Fed Chairman Jerome Powell said in an April 8 letter.
“We don’t strive for inflation significantly above 2 percent, nor do we aim for inflation above 2 percent for an extended period of time,” Powell said Senator Rick Scott in a five-page letter responding to a letter from the Florida Republican replied on March 24, in which he expressed concerns about rising inflation and the Fed’s bond purchase program. “However, I would like to emphasize that we are fully committed to both areas of our dual mandate – maximum employment and stable prices.”
Scott was not a member of the Senate Banking Committee, which directly oversees the Fed, but was a vocal critic of Powell. He has warned that the Fed’s low interest rate and bond purchase program will drive prices up and harm families and businesses.
His office forwarded Powell’s letter to Reuters, suggesting that the response should not allay the Senator’s concerns.
“The data is clear that inflation is rising and Chairman Powell continues to ignore this growing problem,” Scott’s office told Reuters in the email. “Senator Scott remains concerned about the impact of inflation on low-income and fixed-income American families as he grows up. He urges Chairman Powell to face this threat, develop a clear plan to combat rising inflation and protect American families. “
In his letter, Powell said that low inflation limits the Fed’s ability to offset economic shocks through simple policies and that after a decade of low inflation, the Fed is now aiming for inflation moderately above 2%.
“We understand the lessons of the high inflation experience of the 1960s and 1970s and the stress that that experience placed on all Americans,” Powell said in the letter. “We don’t anticipate such inflationary pressures, but we have the means to deal with those pressures if they arise.”
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