U.S. Federal Reserve Chairman Jerome Powell said in testimony to be delivered in Congress that the economy is growing but faces continued threats from the COVID-19 pandemic.
The central bank head also highlighted rising inflation pressures that he expects to lessen over time. As the economy recovers from the pandemic, Powell pledged continued support from the Federal Reserve.
"Since we last met, the economy has shown sustained improvement," Powell said in remarks to be delivered Tuesday (June 22) to the House Select Subcommittee on the Coronavirus Crisis. "Indicators of economic activity and employment have continued to strengthen, and real GDP this year appears to be on track to post its fastest rate of increase in decades."
Though vaccines have dramatically slowed the pace at which COVID-19 has spread through the nation, he said threats remain.
"The pandemic continues to pose risks to the economic outlook," he said. "Progress on vaccinations has limited the spread of COVID-19 and will likely continue to reduce the effects of the public health crisis on the economy. However, the pace of vaccinations has slowed and new strains of the virus remain a risk."
The U.S. central bank kept its benchmark interest rate anchored near zero and is buying at least $120 billion U.S. of bonds each month. But last week’s Federal Open Market Committee meeting indicated that members are looking ahead to when they will start pulling back on policy accommodation.
One worry is that inflation is rising at its fastest pace since the financial crisis and might force the Federal Reserve into raising interest rates faster than expected. Powell said in his remarks that price pressures have increased "notably," but repeated his belief that after special factors ease, inflation will drift back to the Fed’s longer-term 2% target.
