Powell says inflation will be 'elevated' in coming months

WASHINGTON (AP) — Federal Reserve Chair Jerome Powell says that inflation “will likely remain elevated in coming months" before “moderating,” an apparent acknowledgement that price gains have been larger and more persistent than many economists forecast.

In written testimony to be delivered Wednesday at noon before the House Financial Services Committee, Powell reiterated his long-held view that the high inflation readings over the past several months have largely been driven by temporary factors, such as supply shortages and surging demand, as pandemic-related business restrictions ease.

Yet Powell did not repeat an assertion he made just three weeks ago before another House panel, that as the trends pushing prices higher faded, inflation would “drop back” to the Fed's goal of 2%.

Powell's remarks come just a day after a government report showed that prices paid by U.S. consumers surged in June by the most in 13 years. It was the third straight month inflation has jumped. Excluding volatile food and energy costs, so-called core inflation rose 4.5% in June, the fastest pace since November 1991.

Much of the gain was driven by categories clearly affected by the reopening of the economy and related supply shortages, with used car price increases accounting for about one-third of the jump. Prices for hotel rooms, airline tickets, and car rentals also rose substantially.

“The fact that the recent run-up in inflation has been dominated by a few categories should give the Fed leadership continued confidence in their view that it is mostly a transitory increase, a view which the market apparently shares,” Michael Feroli, an economist at JPMorgan Chase, said this week.

But some increases could persist. Restaurant prices rose 0.7% in June, the largest monthly rise since 1981,...