Federal Reserve Chairman Jerome Powell warned that the risk of inflation "could turn out to be higher and more persistent than we expected" following a decision to keep the interest rate unchanged.
JEROME POWELL, FEDERAL RESERVE CHAIRMAN: The process of reopening the economy is unprecedented, as was the shutdown at the onset of the pandemic.
As the reopening continues, bottlenecks, hiring difficulties, and other constraints could continue to limit how quickly supply can adjust, raising the possibility that inflation could turn out to be higher and more persistent than we expected.
Our new framework for monetary policy emphasizes the importance of having well-anchored inflation expectations, both to foster price stability and to enhance our ability to promote are broad-based and inclusive maximum employment goal.
Indicators of long-term inflation expectations appear broadly consistent with our longer-run inflation goal of 2%. If we saw signs that the path of inflation or longer-term inflation expectations were moving materially and persistently beyond levels consistent with our goal, we'd be prepared to adjust the stance of policy.
The effects of the pandemic on the economy have continued to diminish, but risks to the economic outlook remain.
Progress on vaccinations has limited the spread of COVID-19, however, the pace of vaccinations has slowed and the Delta strain of the virus is spreading quickly in some areas. Continued progress on vaccinations would support a return to more normal economic conditions.