US inflation, already growing at 40-year highs, is likely to remain high for a longer-than-expected time, Federal Reserve Chairman Jerome Powell said Wednesday.
He said at a news conference after the conclusion of the central bank’s policy meeting for January that “there’s a risk that the high inflation we’re seeing will be prolonged, there’s a risk that it will move even higher.”
At the same time, Powell noted that the inflation is likely to continue overshooting the Federal Reserve’s long-term annual target of 2%.”
“The economy is now much stronger, the labor market is far stronger, and inflation is running well above our 2% target, much higher than it was at that time and these differences are likely to have important implications for the appropriate pace of policy adjustments,” Powell said.
He also noted that inflation could pose a significant threat to a strong US labor market over time as “high inflation is taking away the benefits of some of these large wage increase that we’re seeing now.”
The Consumer Price Index, a measure of US inflation, grew by 7% in the year to December, expanding at its fastest rate since 1982, from trillions of dollars of relief spending by the government, higher wage payouts by companies and supply chain disruptions caused by the pandemic.