Vaccines are feeding hopes for a stronger and more complete 2021 rebound. Prices are expected to rise temporarily in the coming months, both compared with the weak readings from last year and, potentially, as consumers spend down savings amassed during the lockdown on restaurant dinners and vacations.
But Fed officials have been clear that they do not expect inflation to pick up in a lasting way and that they plan to look past temporary increases when thinking about their policies. Price pressures have been stubbornly tepid, rather than too high, for decades and across many advanced economies.
Mr. Powell said on Tuesday that longer-running inflation trends do not “change on a dime” and that if prices start to rise in an alarming way, the Fed has the tools to fight that.
“I really do not expect that we’ll be in a situation where inflation rises to troubling levels,” Mr. Powell said. “This is not a problem for this time, as near as I can figure.”
He also pushed back on the idea that government spending is poised to send prices rocketing out of control.
“There perhaps once was a strong connection between budget deficits and inflation — there really hasn’t been lately,” Mr. Powell said. He noted that while he does expect inflation to jump around in coming months, there is a distinction between a temporary pop in prices and a sustained increase.
Still, he declined to weigh in on how much more government support is appropriate.
“I, today, will really stay away from fiscal policy,” he said near the very start of the hearing. He went on to tiptoe around or simply decline to answer questions about the minimum wage and the size and various components of the White House’s spending proposal. At one point, he was asked whether he would be “cool” with passing the spending bill or not.