Powell sticks to forecast for inflation to fall back to target

The head of the US central bank doubled down on forecasts for slower inflation as the country's economy reopens.

Jerome Powell said: "“A pretty substantial part, or perhaps all of the overshoot in inflation comes from categories that are directly affected by the re-opening of the economy such as used cars and trucks."

Powell was speaking before the US House of Representatives' Select Subcommittee on the Coronavirus Crisis.

But there was uncertainty around those forecasts, the Federal Reserve's boss also said.

"I will say that these effects have been larger than we expected and they may turn out to be more persistent than we expected."

His remarks followed the 15-16 Federal Open Market Committee's meeting, at which many top Fed officials forecast at least two interest rate hikes by the end of 2023.

Several more said the first hike could arrive in 2022.

Earlier, one of those officials, the head of the New York Fed, John Williams, said he expected the impact from bottlenecks in the economy that were pushing prices higher to subside in 2022 and 2023.

Nevertheless, he too said there was uncertainty, a "great deal" in fact, around the inflation outlook so he would be watching the data closely.

Also on Tuesday, Dallas Fed chief, Robert Kaplan, said he would prefer that the Fed started tapering its bond purchase programme "sooner rather than later".