© Reuters.

(Bloomberg) — Federal Reserve Chair Jerome Powell said the price increases seen in the economy recently are bigger than expected but reiterated that they will likely wane.“A pretty substantial part, or perhaps all of the overshoot in inflation comes from categories that are directly affected by the re-opening of the economy such as used cars and trucks,” Powell said Tuesday in response to a question before the House Select Subcommittee on the Coronavirus Crisis.

But the Fed chair acknowledged the uncertainty around that view.

“I will say that these effects have been larger than we expected and they may turn out to be more persistent than we expected.”Fed officials responded last week to increasing inflation risks by pulling forward their expected timing and pace of interest-rate increases, from the current near-zero level, while also kicking off a discussion of when to taper asset purchases from their current $120 billion monthly pace at their policy meeting.

The quarterly projections showed 13 of 18 officials favored at least one rate increase by the end of 2023, versus seven in March. Eleven officials saw at least two hikes by the end of that year. In addition, seven of them saw a move as early as 2022, up from four. The projections also showed that officials’ sense of risk and uncertainty around their inflation forecasts moved higher.

U.S. central bankers say they will continue buying at a $120 billion monthly pace until the economy has made “substantial further progress” toward its employment and inflation goals.

“We have made progress, for sure, since December of last year,” New York Fed President John Williams said in an interview with Bloomberg Television Tuesday. “I still don’t think it’s close to the ‘substantial further progress’ that we set out.”Cleveland Fed President Loretta Mester told reporters following a virtual event hosted by the Norges Bank that she wants to see further progress, especially on labor force participation.

“I think we are going to get more clarity as we get through the summer and get to September,” Mester said. Opening schools “will help alleviate some of the supply constraints in the labor market,” as well as the expiration of expanded unemployment-insurance benefits in the same month, she added.

©2021 Bloomberg L.P.

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