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Powell: Reopening Could Trigger Inflation But Fed Will Remain Patient

jerome h powell 112818 04mar21 lt

Federal Reserve Chairman Jerome Powell acknowledged Thursday the reopening of the U.S. economy could lead to higher inflation but reiterated the central bank will remain "patient" with regard to monetary policy.

"We expect that as the economy reopens and hopefully picks up, we will see inflation move up through base effects," Powell said in closely watched remarks during The Wall Street Journal Jobs Summit. "That could create some upward pressure on prices."

However, the Fed chief said he expects the increase in inflation to be "transitory," noting an acceleration in the annual rate of inflation would largely reflect comparisons to the low prices seen a year ago.

Powell stressed there is "a lot of ground to cover" before price growth reaches a sustainable level above the Fed's 2 percent target.

The Fed has recently signaled that interest rates will remain at near-zero levels until inflation is on track to moderately exceed 2 percent for some time.

Investors were closely monitoring Powell's comments following a recent spike in bond yields, which has raised concerns about inflation and the outlook for interest rates.

Powell said the recent jump in yields has "caught my attention," and he would be "concerned by disorderly conditions in markets or persistent tightening in financial conditions that threatens the achievement of our goals."

Nonetheless, the Fed chief did not signal a "twist" in the central bank's asset purchases as some investors had been hoping for, leading to another surge in yields.

The increase in yields triggered a sell-off by stocks on Wall Street, with high-flying technology stocks helping lead the way lower.

The Dow and the S&P 500 have tumbled to their lowest intraday levels in a month, while the tech-heavy Nasdaq has plunged to a two-month intraday low.

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