Press conference exchange between HEATHER SCOTT and Fed Chair Jerome Powell:

user: Thank you. Good afternoon, Chair Powell. I wanted to ask you, you know, you’ve been hearing, of course, these concerns raised by Larry Summers and others about inflation and the fact that they think the Fed might be—might let things get out of hand with the new policy stance. So my question is, can you tell us, what is different this time versus previous periods like in the ’60s when inflation got out of control? Why are you confident with, with the lags in monetary policy that the Fed can get ahead of inflation and, and make sure it doesn’t go too far above the 2 percent target?

assistant: Thanks for your question. So I actually have a couple things I’d like to say about inflation, including addressing your question. So let me start with just saying that we’re very strongly committed to achieving our objectives of maximum employment and price stability. Our, our price stability goal is 2 percent inflation over the longer run, and we believe that having inflation average 2 percent over time will help anchor long-term inflation expectations at 2 percent. With inflation having run persistently below 2 percent for some time, the Committee seeks inflation moderately above inflation for two times—above 2 percent for some time. So, with a, a little bit of context, we’re, we’re making our way through an unprecedented series of events, really, in which a synchronized global shutdown is now giving way to widespread reopening of economies in many places around the world. In the United States, fiscal and monetary policy continue to provide strong support: Vaccinations are now widespread, and the economy is beginning to move ahead with real momentum. During this time of reopening, we are likely to see some upward pressure on prices, and I’ll discuss why. But those pressures are likely to be temporary as they are associated with the reopening process. In an episode of one-time price increases as the economy reopens is not the same thing as, and is not likely to lead to, persistently higher year-over-year inflation into the future— inflation at levels that are not consistent with our goal of 2 percent inflation over time. Indeed, it is the Fed’s job to make sure does not happen. If, if, contrary to expectations, inflation were to move persistently and materially above 2 percent in a manner that threatened to move longer-term inflation expectations materially above 2 percent, we would use our tools to bring inflation and expectations down to mandate-consistent levels. And I would say, if I may, that is a principal difference from—we’re all very familiar at the Fed with the history of the 1960s and ’70s, of course. And we know that our job is to achieve 2 percent inflation over time. We’re committed to that, and we will use our tools to do that. So that’s a very different situation than you had back in the 1960s—or many, many differences, actually. So let me talk quickly about the two reasons—two, or you could say three, but really two main reasons why we think inflation will move up in the near term. The first is the base effects. Twelve-month measures of inflation are likely to move well above 2 percent over the next few months as the very low inflation readings recorded in March and April of last year drop out of the calculation. That process has already started to show up. You saw it in the March CPI reading, and you’ll see it later this week in the PCE price data. These base effects will contribute about 1 percentage point to headline inflation and about 0.7 percentage point to core inflation in April and May. So, significant increases, and they’ll disappear over the following months. And they’ll be transitory. They carry no implication for the rate of inflation in later periods. So that’s base effects. The other big one I would talk about is bottlenecks. So this is what we’re seeing in supply chains in various industries, and we’re, we’re in close touch with all of these industries. You know, the Fed has a network of contacts that is unequaled in businesses and in nonprofits for that matter, too. So what do we mean by a bottleneck? A bottleneck really is a temporary blockage or restriction in the supply chain for, for a particular good or goods, something that slows down the process of producing goods and delivering them to the market. We think of bottlenecks as things that, in their nature, will be resolved as workers and businesses adapt, and we think of them as not calling for a change in monetary policy since they’re temporary and expected to resolve themselves. We know that the base effects will disappear in a few months. It’s much harder to predict with confidence the amount of time it will take to resolve the bottlenecks, or for that matter, the temporary effects that they will have on prices in the meantime. So, you know, I’ll just sum up and say, we understand our job. We will do our job. And we are, we are focused—as you’ve seen, for many years, we’ve been focused on inflation deviating below 2 percent, and we used our tools aggressively to keep it back up at 2 percent. If, if we see inflation moving materially above 2 percent in a persistent way that risks inflation expectations drifting up, then we will use our tools to guide inflation and expectations back down to 2 percent. No one should doubt that we will do that. This is not what we expect. But no one should doubt that, in the event, we would be prepared to use our tools.