Federal Reserve Chair Jerome Powell said supply-chain bottlenecks have lasted longer than anticipated, and he expects inflation pressures to remain high in coming months before easing.
"These effects have been larger and longer-lasting than anticipated, but they will abate, and as they do, inflation is expected to drop back toward our longer-run 2 percent goal," Powell said in testimony to the Senate Banking Committee released Monday. "As reopening continues, bottlenecks, hiring difficulties, and other constraints could again prove to be greater and more enduring than anticipated, posing upside risks to inflation."
At the same time, Powell said, labor-market gains slowed last month, especially in sectors sensitive to the pandemic. The 5.2 percent unemployment rate understates the shortfall in employment as indicated by the fact that the labor force participation rate hasn't picked up, he added.
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