Testifying before the Senate Committee on Banking, Housing, and Urban Affairs on Tuesday, Federal Reserve Chairman Jerome Powell admitted that inflation will not only continue, but continue to rise.
The Fed Chairman appeared to lay the blame on the “Omicron” variant of COVID, rather than the Fed or the spending policies of the Biden administration.
Fed Chairman Jerome Powell to warn Congress that inflation may keep rising next year https://t.co/wbYTGpVipk
— CBS News (@CBSNews) November 30, 2021
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Inflation Will No Longer Be ‘Transitory’
Powell also stated in his testimony that the Federal Reserve would no longer be using the word “transitory” to describe the current inflation situation.
Powell said of the word choice, “We tend to use [the word transitory] to mean that it won’t leave a permanent mark in the form of higher inflation. I think it’s probably a good time to retire that word and try to explain more clearly what we mean.”
What it means is that inflation may not be going anywhere anytime soon. Rather than decrease, inflation has only increased so far.
In October, the Consumer Price Index stood at 6.2%, the fastest yearly growth since 1990.
Today’s hearing with Jerome Powell confirms:
Inflation isn’t transitory
It’s here to stay
It’s gonna get worseAt least we don’t have mean tweets anymore!
— Julio Gonzalez – juliogonzalez.com (@TaxReformExpert) November 30, 2021
Making Excuses
Powell claimed that the economy and labor market continue to strengthen, but seemed to blame the summertime surge of the Delta COVID variant for ongoing economic woes.
During his testimony, Powell also touched on the new Omicron variant of the COVID-19 virus, and how it might effect not just inflation but employment as well.
“The recent rise in COVID-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation. Greater concerns about the virus could reduce people’s willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions.”
But Powell’s outlook is a stark departure from his position back in July.
He stated then that he believed inflation would be elevated for a time, then begin to “moderate.” He also said he believed the inflation was due to temporary issues like supply shortages and rising demand as pandemic restrictions eased on businesses.
Jerome Powell changes his mind on inflation quicker than you can shake a stick. First, inflation was transitory. Now, Omicron might keep it surging. He also still blames supply chain issues for inflation, not the spike in US money supply. Powell seems losthttps://t.co/7ufh9qCzF3
— Steve Hanke (@steve_hanke) November 30, 2021
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Also testifying before the Senate committee was Treasury Secretary Janet Yellen. She stated that the U.S. must get a handle on the pandemic before prices will come down.
Last week, President Joe Biden stated that he would keep Jerome Powell on for a second term as Federal Reserve Chairman.
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