The Fed chairman also admitted that prices could rise later this year if Americans take a spike in spending if the coronavirus gets under control.
Powell stressed, however, that he does not expect any sustained price increases. Inflation has been slowed for decades by increasing international competition, growing online trade and other trends that take some time to change.
“I don’t expect we’re in a situation where inflation will rise to problematic levels,” Powell said.
Powell’s remarks to the banking committee come on the first of two days of the biannual testimony to Congress that is required by law. On Wednesday he will testify before the House Financial Services Committee.
His testimony comes from the fact that the economy is gradually improving in key areas and that manufacturing and retailing are picking up again despite a stagnating labor market. Nevertheless, the steady rise in interest rates has unsettled the stock market. On Monday, the tech-heavy Nasdaq index fell a steep 2.5% as the yield on the 10-year Treasury note rose to nearly 1.37%. At the beginning of the year, the 10-year return was below 1%.
Powell attributed this increase to optimism about a possible acceleration in growth.
“In a way, it’s a declaration of confidence from the markets that we will rebound robustly,” said Powell.
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