Powell: Fed must convince public it can tame inflation

WASHINGTON (AP) — As if their job weren't hard enough at a time of raging inflation, Chair Jerome Powell and his Federal Reserve colleagues have to do more these days than decide just how much to raise interest rates without triggering a recession.

They also have a sales job on their hands: Convincing the public that they will succeed in reducing inflation — now at 8.6%, a four decade high — to the central bank's goal of 2% a year.

And on Thursday, Powell told Congress that Americans do seem reassured, at least for now: Measures of consumer sentiment show that people generally think inflation will eventually subside.

“People do expect inflation to come back down to levels that are consistent with our price stability mandate," Powell told the House Financial Services Committee on the second of two days of testimony as part of the Fed’s semiannual report to Congress. "But we haven’t had a test like this. We haven’t had an extended period of high inflation for a long time. So it’s not a comfortable place to be.″

If the Fed failed to reassure the public that it can curb inflation, many Americans would assume that prices were heading ever higher. Their likely responses — demanding increasingly higher wages or rushing to make purchases now before prices go even higher — could make inflation even worse.

Powell and the Fed are in the hot seat because inflation, which had been an economic afterthought for decades, has shot to the top of threats to the economy and concerns of American households. Average wages are rising, but not nearly enough to keep up with accelerating prices. On Thursday, committee members repeatedly reminded Powell that their constituents are feeling pain at the grocery store and the gasoline station.

Economists blame a confluence of factors for the...