At this week’s confirmation hearing of Jerome Powell for Federal Reserve chairman, his views on inflation may now be question No. 1.
Powell is scheduled to testify on Tuesday before the Senate Banking Committee, and the inflation issue has now become more important after comments last week by current Fed Chair Janet Yellen. She expressed increasing doubts about the inflation outlook, saying she expects it “to move back up over the next year or two” toward the Fed’s 2 percent goal.
But, she added, “I will say I’m very uncertain about this.”
That’s a change for Yellen, who has insisted for most of this year that persistently low inflation rates were transitory. The Fed’s preferred inflation indicator, the core personal consumption expenditures (PCE) index, which excludes food and energy, has fallen from 1.9 percent a year ago to just 1.3 percent in September. It’s shown little sign of a rebound even while unemployment has dropped and growth has picked up.
Yellen is now concerned that there are longer-term trends at work, and suggested that those concerns are shared by others at the Fed. “My colleagues and I are not certain that it is transitory,” Yellen said in a speech Tuesday at New York University’s Stern School of Business.
That raises the question of what Powell now believes. A Fed governor for the past five years, Powell has expressed some concerns about low inflation but hasn’t yet gone as far as Yellen. In an Aug. 25 CNBC interview, Powell called low inflation “kind of a mystery.”