Powell, in letter to senator, says we will not let inflation exceed target “substantially”

By Ann Saphir

Apr 20 (Reuters) – The US economy will temporarily see “slightly higher” inflation this year as the economy strengthens and supply constraints drive prices up in some sectors, but the Federal Reserve is committed to maintaining any increases within limits, Fed Chairman Jerome Powell said in an April 8 letter.

“We are not looking for inflation to substantially exceed 2%, nor are we looking for inflation above 2% for an extended period of time,” Powell told Sen. Rick Scott in a five-page letter in response to a March 24 letter from the Republican. Florida who expressed concerns about rising prices and the bond purchase program.

“I would like to emphasize, however, that we are fully committed to both parts of our dual mandate: full employment and stable prices.”

Scott, while not on the Senate Banking Committee that directly oversees the Fed, has openly criticized Powell. He has warned that low interest rates from the central bank and the bond purchase program will boost prices, hurting families and businesses.

His office provided Powell’s letter to Reuters and suggested that the response did not allay the senator’s concerns.

“The data is clear to show that inflation is increasing and President Powell continues to ignore this growing problem,” Scott’s office told Reuters in an email.

“Senator Scott remains concerned about the impact inflation will have on low-income and fixed-income American families, like his when he was young. Asks President Powell to wake up to this threat, develop a clear plan to address rising inflation and protect American families, “he added.

In his letter, Powell asserted that low inflation limits the Fed’s ability to offset economic shocks with expansionary monetary policy, and that after a decade of too low inflation, the Fed aims for it to now moderately exceed 2%.

“We well understand the lessons of the high inflation experience in the 1960s and 1970s, and the burdens that experience created for all Americans,” Powell said in his letter. “We do not anticipate inflationary pressures of that type, but we have the tools to address such pressures if they arise.”

(Report by Ann Saphir, Edited in Spanish by Manuel Farías)