Jerome Powell, chairman of the U.S. Federal Reserve, said Thursday that the central bank is “not comfortable” with recent inflation figures, but he believes the aggressive rate of price increases have come because of a “shock going through the system” rather than factors in the underlying economy. Speaking before a congressional committee, Powell suggested that the Fed’s main focus is on inflation expectations as it decides when to tighten its highly accommodative monetary policy. The Fed chair acknowledged that recent inflation figures, including a consumer price report earlier this week that showed a 5.4% annual inflation rate, were “well above” the 2% mark policymakers target. He added that these inflation indicators were also higher than the central bank had expected prior to the start of the economic recovery. However, Powell argued that the increased prices were not tied to the “usual things” that drive inflation, like a tight labor market. Rather, he blamed the “shock” of the economy coming back to life after the COVID pandemic. Powell said it would be “inappropriate” to react aggressively to the high inflation if it proves to be temporary. However, he said the Fed would monitor statistics and rethink its course if the high rates of price increases last longer than expected. Powell supported his view that high inflation rates will be temporary by pointing to the list of items that have seen the most significant price increases. The Fed chair said that a “handful of things, all of which are tied to the reopening” have accounted for “essentially all of the overshoot” in recent inflation numbers compared to the target level. Specifically, Powell cited airplane tickets and hotel rooms, as well as new, used and rented cars. “What we don’t see now is broad inflation pressure showing up in a lot of categories,” he said. “The concern would be if we did start to see that.” Powell added: “We won’t have to wait a tremendously long time to know whether our basic understanding of this is right.” Longer-term, Powell focused on inflation expectations as an important measure the central bank will be “closely watching” as it determines future policy. He said the Fed wants inflation expectations anchored at 2%. Powell’s comments came as part of his regular semiannual appearance before the Senate. In his prepared testimony, the Fed chair repeated his remarks from the previous day, when he told a House of Representatives committee that a decision to begin tightening monetary policy was still “a ways off.” Nick Note: I am afraid they are behind the power curve and have let the inflation gennie out of the bottle. And their will be hell to pay by the masses. For us it could well be our greatest pay day ever…..