Federal Reserve Chairman Jerome Powell vowed on Wednesday to prevent inflation from getting out of hand.
“If we do see that inflation expectations are moving up or inflation is on a path to remain well above our goals and risks setting us off on a period of high inflation,” Powell told lawmakers, “then we’ll use our tools to guide inflation back to 2%.”
In other words, the Fed would stop its emergency asset purchases and rapidly raise interest rates – moves that should ease inflation but may also roil markets and slow the economy.
“In the end, it will be transitory,” Powell said. “And people need to have faith in the central bank that we will do it.”
The Fed chief was responding to concerns from multiple lawmakers about high inflation readings.
“I’m nervous about this,” Republican Rep. Frank Lucas of Oklahoma told Powell.
Lucas recalled that he was a farmer and college student during the super inflation spike of the late 1970s and early 1980s. The Fed eventually defeated inflation by dramatically hiking interest rates.
“It was really hard on me and a lot of people across this great country,” Lucas said, referring to the Fed’s rate hikes.
Still, Powell stressed that the Fed doesn’t want to overreact to what it believes will be temporary inflation.
“It would be a mistake to act prematurely,” Powell said.