The Federal Reserve won’t allow the economy to overheat and cause inflation to soar, new chairman Jerome Powell will testify Tuesday.
But the Fed also won’t allow inflation to run below its 2 percent target much longer, as it has for most of the past five years, Powell indicated in testimony prepared for his first appearance on Capitol Hill as the head of the central bank.
“In gauging the appropriate path for monetary policy over the next few years, the [Fed’s monetary policy committee] will continue to strike a balance between avoiding an overheated economy and bringing … inflation to 2 percent on a sustained basis,” Powell said in his prepared remarks to the House Financial Services Committee.
The testimony suggests that Powell is fully committed to the agenda pursued by his predecessor, Janet Yellen, whom he thanked in his remarks.
Powell also shrugged off the recent stock market turbulence, and hinted it wouldn’t affect the Fed’s plans for gradually raising its interest rate target. Despite recent volatility, he said, financial markets are overall “accommodative” for economic growth.
Powell faces two days of testimony this week as he delivers the semi-annual monetary policy report to Congress.
