WASHINGTON: US inflation may be higher than usual now but it is unlikely that it will get to as bad as it did in the 1970s, Federal Reserve Chairman Jerome Powell said in a congressional hearing.
“That’s very, very unlikely, with what we’re seeing now,” Powell told a hearing in Congress on Tuesday when asked if price pressures will get to the point of being like in the 1970s, known as the “decade of inflation” in the United States.
The average US inflation rate in that era was 6.8 percent, nearly triple the rate of the previous two decades and double the long-run historical average.
The Fed typically tries to keep inflation at an annual average of 2 percent. The core Personal Consumption Expenditure Index used by the central bank, however, jumped by a multiyear high of 3.1 percent in April from a year ago.
Powell and senior officials of the Fed’s policy-making Federal Open Market Committee, or FOMC, have expressed concern with current US inflation trends. But they also say the phenomenon is caused by soaring prices of commodities and other raw materials and basic services struggling to expand after months of pandemic-suppression due to the COVID-19.
US Congress has, meanwhile, authorized trillions of dollars of spending to provide relief to Americans during the pandemic, adding to the price pressures.
After keeping interest rates at between zero and 0.25 percent for more than a week, the FOMC indicated last week that there might be two hikes before the end of 2023 to bring rates to 0.6 percent.