Jerome Powell, chairman of the Federal Reserve, said the supply bottleneck lasted longer than expected and he expected inflation to remain high in the coming months before slowing down.
"these effects are greater and longer than expected, but will weaken, and inflation is expected to fall back to our longer-term 2 per cent target," Powell said in testimony prepared for Tuesday's Senate Banking Committee hearing. "as the reopening continues, constraints such as [supply] bottlenecks and recruitment difficulties may once again prove more serious and lasting than expected, posing an upward risk to inflation."
Meanwhile, Powell said growth in the job market slowed last month, especially in sectors sensitive to the epidemic. He added that the 5.2 per cent unemployment rate underestimated underemployment, as shown by the fact that the labour force participation rate had not yet accelerated.
The Fed last week left its benchmark interest rate unchanged at 0.25 per cent and said it may soon be necessary to scale back its $120 billion-a-month asset purchase programme if the economy continues to move towards the Fed's goal.
At a press conference after the policy meeting, Powell said the inflation test for scaling back bond purchases had been met, while the employment test was "almost there".
Mr. Powell did not discuss scaling back asset purchases in his speech for Tuesday's hearing.