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Powell: Economy Growing Rapidly        06/22 06:06

   The economy is growing at a healthy clip, and that has accelerated 
inflation, Federal Reserve Chair Jerome Powell says in written testimony to be 
delivered Tuesday at a congressional oversight hearing.

   WASHINGTON (AP) -- The economy is growing at a healthy clip, and that has 
accelerated inflation, Federal Reserve Chair Jerome Powell says in written 
testimony to be delivered Tuesday at a congressional oversight hearing.

   Still, Powell reiterated his view that inflation's recent jump to a 13-year 
high would prove temporary.

   "Inflation has increased notably in recent months," Powell said in the 
prepared remarks. He blamed the rise on several factors, including sharp price 
declines last year at the onset of the pandemic, which make inflation figures 
now, compared with a year ago, look much larger. Higher gas prices, and rapid 
increases in consumer spending as the economy reopens, coupled with supply 
bottlenecks, have also contributed to rising costs.

   "As these transitory supply effects abate, inflation is expected to drop 
back toward our longer-run goal," Powell said, referring to the 2% inflation 
rate the Fed typically targets. Currently, however, the Fed is seeking to push 
inflation slightly above 2% to make up for the roughly nine years that it has 
come in below that level.

   Powell's remarks follow a meeting of the Fed's policymaking committee last 
week, when central bank officials signaled they now may increase the Fed's 
benchmark interest rate twice in 2023. That's earlier than the time frame they 
set out in March, when no rate hike was expected until after 2023.

   Powell also said the Fed had formally begun discussing when and how the 
central bank might reduce the current $120 billion a month of Treasurys and 
mortgage-backed bonds that the Fed is purchasing each month.

   Both moves were seen as evidence that the Fed wanted to signal it was 
prepared to keep inflation in check without initially taking any steps to pull 
back on its efforts to stimulate the economy.

   Powell will testify Tuesday before a congressional oversight panel about the 
Fed's unprecedented steps last year to provide extraordinary support to 
financial markets at the outset of the pandemic, including the first purchases 
of corporate bonds in the Fed's history.

   Separately, some Fed officials are also making it clear that they are ready 
to lift interest rates even earlier. On Friday, St. Louis Federal Reserve 
President James Bullard said he favored lifting rates in 2022.

   That caused a sharp stock market sell-off. Higher interest rates generally 
make stocks less attractive to investors and make bonds a more appealing 
investment.

   But on Monday, New York Federal Reserve Bank President John Williams, who 
also serves as vice chair of the Fed's policymaking committee, said that while 
the economy is rapidly improving, "conditions have not progressed enough for 
the (Fed) to shift its monetary policy stance of strong support for the 
economic recovery."

   "I expect that as price reversals and short-run imbalances from the economy 
reopening play out, inflation will come down from around 3% this year to close 
to 2% next year and in 2023," Williams said.

   U.S. stocks recovered most of their Friday losses on Monday.

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