Amid concerns about rising inflation, Federal Reserve Chair Jerome Powell said on Tuesday that inflation dynamics generally do not “change on a dime” and that if price pressures do arise, the Fed has the tools to deal with them.
JEROME POWELL: On inflation, let me say that we do expect that, as the-- couple of things. First, as the very low readings of last March and April drop out of the 12-month calculation as we move forward this year, we expect readings on inflation to move up. That's called base effects. That'll be a temporary effect and it won't really signal anything.
More importantly though, with all the factors we've been discussing, you could see spending pick up pretty substantially in the second 1/2 of the year, and that would be a good thing, of course. But it could also put upward pressure on prices. And I would just say that, essentially, it's not-- it doesn't seem likely that that would result in very large increases or that they would be persistent.
We've all been living in a world for a 1/4 of a century and more where all of the pressures were disinflationary, you know, pushing downward on inflation. We've averaged less than 2% inflation for more than the last 25 years. Inflation dynamics do change over time, but they don't change on a dime. And so we don't really think [INAUDIBLE] see how a burst of fiscal support or spending that's not-- that doesn't last for many years would actually change those inflation dynamics. I will also say, there's-- forecasters need to be humble, and have a great deal to be humble about, frankly, but so if we turn-- if it does turn out that unwanted inflation pressures arise and they're persistent, then we have the tools to deal with that, and we will.
You ask about the US economy and the world economy. I do think, and many forecasters agree, that once we get this pandemic under control, you know, we could be getting through this much more quickly than we had feared, and that would be terrific, but it's not done yet. The job is not done. That's the thing I keep coming back to, is we've got to finish the job with the pandemic, get it under control so that the US economy can really reopen.