While the U.S. economy has strengthened in recent months, higher inflation will likely persist into 2022, and the emergence of the new omicron COVID-19 variant poses risks to employment and economic activity, Federal Reserve Chairman Jerome Powell said Tuesday.
"Most forecasters, including at the Fed, continue to expect that inflation will move down significantly over the next year as supply and demand imbalances abate," Mr. Powell said in testimony before the Senate Banking Committee. "It is difficult to predict the persistence and effects of supply constraints, but it now appears that factors pushing inflation upward will linger well into next year."
With persistent levels of higher inflation in mind, Mr. Powell said the Fed may speed up plans to taper its monthly bond purchases. Those purchases — $80 billion in Treasury securities and $40 billion of mortgage-backed debt each month — were established in response to the coronavirus pandemic last year. At its last meeting in early November, the Fed indicated that it would scale back its bond purchases by $15 billion a month starting in November.