Jerome Powell, chairman of the U.S. Federal Reserve, speaks during a House Select Subcommittee on the Coronavirus Crisis hearing in Washington, D.C., U.S., September 23, 2020.
Stefani Reynolds | Reuters

Federal Reserve Chairman Jerome Powell said in testimony prepared for delivery to Congress this week that the economy is growing but faces continued threats from the coronavirus pandemic.

The central bank leader also highlighted rising inflation pressures that he expects to lessen over time.

As the economy recovers from the pandemic, he also pledged continued support from policies the Fed put into place in the early days of the Covid-19 threat.

“Since we last met, the economy has shown sustained improvement,” Powell said in remarks he will deliver Tuesday to the House Select Subcommittee on the Coronavirus Crisis.

“Widespread vaccinations have joined unprecedented monetary and fiscal policy actions in providing strong support to the recovery. Indicators of economic activity and employment have continued to strengthen, and real GDP this year appears to be on track to post its fastest rate of increase in decades,” he added. “Much of this rapid growth reflects the continued bounce back in activity from depressed levels.”

Though vaccines have dramatically slowed the pace at which the virus has spread through the nation, he said threats remain.

“The pandemic continues to pose risks to the economic outlook,” he said. “Progress on vaccinations has limited the spread of COVID-19 and will likely continue to reduce the effects of the public health crisis on the economy. However, the pace of vaccinations has slowed and new strains of the virus remain a risk.”

The Fed has kept its benchmark short-term lending rate anchored near zero and is buying at least $120 billion of bonds each month.

But last week’s Federal Open Market Committee meeting indicated that members are looking ahead to when they will start pulling back on policy accommodation.

One worry is that inflation is rising at its fastest pace since the financial crisis and might force the Fed into raising interest rates faster than it wants. Powell said price pressures have increased “notably,” but repeated his belief that after special factors ease, inflation will drift back to the Fed’s longer-term 2% target.

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