Fed's Powell sees inflation lingering, downside risk from Covid

Federal Reserve Chair Jerome Powell on Monday said he continues to expect high inflation to recede over the next year as supply and demand come into better balance, but warned that prices could continue to rise for longer than earlier thought.

"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," Powell said in testimony prepared for delivery Tuesday at the US Senate Banking Committee, and released Monday by the Fed. "In addition, with the rapid improvement in the labor market, slack is diminishing, and wages are rising at a brisk pace."

The recent rise in Covid-19 cases along with the emergence of the new Omicron variant pose "downside risks" to employment and economic growth, and "increased uncertainty for inflation," Powell added.

The Fed, Powell promised, "is committed to our price-stabilty goal" will use its to support the economy and the labor market but also to prevent any upward spiral in inflation.