Jerome Powell, chairman of the Federal Reserve, said in his testimony to Congress on Wednesday that changes in the money supply level have historically not affected inflation levels.
In response to a question posed by Congressman Warren Davidson or ‘M2 [money supply] Powell will rise by 25% in one year “will reduce the value of the US dollar,” Powell replied, “there was a time when monetary policy aggregates were important determinants of inflation and this was far from the case. . ”
Powell added that “the correlation between different aggregates [like] M2 and inflation are just very, very low, and you see it now, where inflation is 1.4% for this year. Inflation dynamics develop over time, but they do not tend to change overnight. ”
Asked about his view of inflation as a whole, Powell said: ‘We expect inflation to rise because of the base effects … and also because we may have an increase in spending as the economy reopens, we do not expect it to be a sustained long-term force, so although you may see prices rise, it is a different thing from persistently high inflation that we do not expect. If we do get it, we have the tools to deal with it. ”
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