Press conference exchange between ANNEKEN TAPPE and Fed Chair Jerome Powell:

user: the price jumps we’ve seen in some raw materials—lumber for example you mentioned that earlier—seem to be easing And it looks like we’re at the beginning of suppliers catching up with demand But I wonder if you’re worried at all if we’re going to end up with excess supply immediately after those shortages wear off and if we just continue this mismatch as we’re recovering and getting out of the pandemic economy And I wonder how that would affect the Fed’s outlook at all

assistant: Well, that is really not the problem we’re having right now. But— and, actually, people who work in commodity industries are very focused on that, because they know that, you know, they don’t want to build, build capacity and then find out that it’s not necessary. So, really, the problem now is, is that demand is very, very strong. Incomes are high, people have money in their bank accounts. Demand for goods is extremely high, and it hasn’t— it hasn’t come down. We’re seeing the service sector reopening. And so you’re seeing prices are moving back up off their lows there. But in terms of, of overcorrecting, I mean, I think there, there is a possibility on the other side of this that, that inflation could be—could actually be quite low going forward. But that’s not—that’s not really where our focus is right now. Our focus right now is, we need to—our, our expectation is that these, these high inflation readings that we’re seeing now will start to abate. And that’s, that’s what we think. And it’ll be like the lumber experience, and like we expect the used car experience to be. With things like airplane tickets and hotels, which are the other two factors in the most recent CPI report that went up a lot, we expect that those prices will get back up to where they were, but there’s no reason to think that they’re going to keep going up a lot. Because if they are, people will build new hotels. There’s no reason for supply and demand to be out of whack in the hotel business over any period of time. So we think that’ll happen. I think in terms of the timing and the effects on inflation in the near term, there’s a lot of uncertainty. The overall story is one that, that we think is right, and we think the incoming data support it and, you know, so do many, many forecasters. And if you look at the forecasts on the FOMC, you will—you will see that as well. But we don’t—we don’t in any way dismiss the chance that it can work out that, that this goes on longer than expected. And the risk would be that over time, it does begin to affect inflation expectations. And if we see inflation expectations and inflation—or inflation moving up in a way that is really materially above what we—what we would see as consistent with our goals, and persistently so, we wouldn’t hesitate to use our tools to address that. Price stability is half of our mandate, and we would certainly do that. We do not expect that, though. That is not our base case. And, and in that we’re joined by many other forecasters, but there’s a lot to be humble about among forecasters. Forecasters have a lot to be humble about. It’s a—it’s a highly uncertain business. And we’re, we’re very much attuned to the risks and, and watching the data carefully. In the meantime, I would say, you know, we should—as I mentioned earlier, there’s so much uncertainty around this. It’s, it’s just a unique situation that we need to see how things evolve in coming months and, and see how that story holds up and act accordingly.