Federal Reserve Chair Jerome Powell said Wednesday that inflation has increased notably in the US and it will likely remain elevated in coming months before moderating.

“As the economy continues to reopen and spending rebounds, we are seeing upward pressure on prices,” he said at a news conference after the central bank kept its benchmark interest rate unchanged between the 0.00% – 0.25% range.

Powell said upward pressure on prices is a result of supply bottlenecks that limit how quickly production can respond to increasing demand from consumers as the economy rapidly reopens from the coronavirus pandemic.

“These bottleneck effects have been larger than anticipated. But as these transitory supply effects abate, inflation is expected to drop back to our longer-run goal,” he said.

The chair noted that increasing oil and energy prices have also contributed to the rise in inflation.

Powell has repeatedly said in recent months that the Fed will allow inflation to climb above its 2% target for some time until labor market conditions improve and maximum employment is achieved.

Inflation, however, has soared much higher than the Fed anticipated since the central bank injected trillions of dollars of liquidity into the markets during the pandemic to support the American economy and people.

The Producer Price Index (PPI), which measures the change in the prices of goods sold by manufacturers, soared 7.3% in June, from the same month last year, which was the largest 12-month increase since November 2010.

The Consumer Price Index (CPI) that measures changes in the price of goods and services from a consumer perspective, jumped 5.4% in June year-over-year — the largest 12-month increase since August 2008.

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