Jerome Powell, the Federal Reserve chair, signaled on Tuesday that the central bank is growing more concerned about high — and stubborn — inflation, and could speed up its plan to withdraw economic support as it tries to ensure that rapid price gains do not become long-lasting.
His comments, delivered during a Senate Banking Committee hearing, came at a challenging economic moment for the Fed. Prices for food, shelter and other items are rising quickly, millions of workers have yet to return to the labor market and the virus continues to pose risks to the economic outlook, most recently with the new omicron variant.
The Fed had been buying $120 billion in government-backed securities each month throughout much of the pandemic to bolster the economy by keeping money flowing in financial markets. In November, officials announced plans to slow those purchases by $15 billion per month, which would have the program ending midway through 2022. But Powell signaled on Tuesday that the central bank could wrap up its bond-buying more quickly, cutting down the amount of economic juice the Fed will add in upcoming months.
“At this point, the economy is very strong, and inflationary pressures are high,” Powell said during a hearing before the Senate Banking Committee. “It is therefore appropriate in my view to consider wrapping up the taper of our asset purchases, which we actually announced at our November meeting, perhaps a few months sooner.”
Powell said he expected Fed officials to discuss slowing bond purchase faster “at our upcoming meeting,” which is scheduled for Dec. 14-15.
The economy has boomed back this year, and hot demand has collided with constrained supply to push inflation sharply higher. The central bank has slowly reoriented its economic policy stance as price gains remain stubbornly elevated, trying to put itself in position to react if needed. Now, the Fed appears to be pivoting more aggressively — and focusing more concertedly on controlling rapid inflation.
“Generally, the higher prices we’re seeing are related to the supply-and-demand imbalances that can be traced directly back to the pandemic and the reopening of the economy, but it’s also the case that price increases have spread much more broadly in the recent few months,” Powell said Tuesday. “I think the risk of higher inflation has increased.”