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The current bout of elevated inflation in the U.S. is tied to the reopening of the economy as it recovers from the pandemic and won’t lead to a new regime of higher inflation going forward, Federal Reserve Chair Jerome Powell said.
“For some time, we and others have been forecasting that the current inflation spike will not lead to a new inflation regime in which inflation remains high year after year,” Powell said Wednesday while participating in a virtual panel event at a conference hosted by the European Central Bank.
“The current inflation spike is really a consequence of supply constraints meeting very strong demand, and that is all associated with the reopening of the economy -- which is a process that will have a beginning, a middle and an end,” he said. “It’s very difficult to say how big the effects will be in the meantime, or how long they will last, but we do expect that we’ll get back, we’ll get through that.”
Powell appeared on the panel alongside his counterparts at the European Central Bank, Bank of Japan and Bank of England, who sounded similar notes of cautious optimism that the supply-side disruptions plaguing the global economy and leading to elevated inflationary pressures would ultimately prove temporary.
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