Federal Reserve Chairman Jerome Powell has warned Congress that he expects prices of consumer goods to continue rising as inflation lingers "well into next year."
Powell made the comments Tuesday before the Senate Committee on Banking, Housing, and Urban Affairs. The committee was holding a hearing on "CARES Act Oversight of Treasury and the Federal Reserve: Building a Resilient Economy."
"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," he testified.
Powell said the latest coronavirus variant, Omicron, will likely only make things worse -- slowing the economy and hiring.
"The recent rise in COVID-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation," he said. "Greater concerns about the virus could reduce people's willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions."
Powell said overall inflation is running well above the 2% target, with the price index for personal consumption expenditures up 5% over the 12 months ending in October.
"Pandemic-related supply and demand imbalances have contributed to notable price increases in some areas," he said. "Supply chain problems have made it difficult for producers to meet strong demand, particularly for goods. Increases in energy prices and rents are also pushing inflation upward."
Still, Powell pointed out that most economists expect inflation "will move down significantly over the next year as supply and demand imbalances abate."
"We understand that high inflation imposes significant burdens, especially on those less able to meet the higher costs of essentials like food, housing, and transportation," he said. "We are committed to our price-stability goal. We will use our tools both to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched."