Republicans have blamed the jump in prices on government spending. The acceleration has come in part because supply has not been able to adjust rapidly enough to meet the demand that huge amounts of pandemic-era stimulus helped to unleash.
They’re also invoking inflation to bludgeon the administration’s plans for additional outlays.
Bryan Steil, a Republican representative from Wisconsin, quizzed Treasury Secretary Janet L. Yellen about how spending and the debt path might affect inflation going forward during a hearing on Thursday. He also asked Mr. Powell, who was testifying alongside Ms. Yellen, for the Fed’s plan for dealing with rapid price gains.
“Regardless of what the White House press team says, I think people are really seeing the impact of higher prices, day in, day out,” Mr. Steil said, later suggesting that “runaway spending” in Washington would increase consumer inflation expectations.
The Fed aims for 2 percent inflation on average over time; under a policy framework it adopted last year, it can tolerate periods of higher prices as long as they are not expected to last. Officials are watching the current jump in prices to make sure that they moderate as expected.
So far, longer-term consumer and market inflation expectations have remained tame, suggesting that people still do expect price gains to slow with time. Fed officials hope that will keep price inflation under wraps in the longer term.
But policymakers are positioning themselves for a different reality. The central bank has clearly signaled that it could announce a plan to dial back its big bond-buying program as soon as November, the first step in removing monetary policy support for the economy.
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