WASHINGTON, DC - FEBRUARY 11:  Federal Reserve Boa
Federal Reserve Board Fed Chairman Jerome Powell (Getty)
  • The US Fed expects it will "be patient" with policy as it waits for inflation to trend higher, Chair Powell said.
  • Treasury yields soared last week as investors bet on the Fed to tighten monetary policy sooner than expected.
  • Reopening stands to lift inflation, but Powell said the effect will likely be transitory.
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US Federal Reserve Chair Jerome Powell said Thursday he expects the central bank will "be patient" in waiting for inflation to steadily trend above 2%.

Treasury yields ripped higher last week as investors viewed new stimulus and continued vaccination as opening the door for stronger price growth and, in turn, an earlier tightening of monetary conditions. The price action projected the Fed could lift interest rates as early as the second quarter of 2022, well before previous expectations for a rate hike coming after 2023.

The Fed chief's comments are the first to reaffirm that, despite the Treasury market's shift, the central bank is steadfast in maintaining its ultra-easy monetary policy. Economic reopening will likely lift prices, but only for a short while, Powell said.

"It is more likely that what happens in the next year or so is going to amount to prices moving up, but not staying up. And certainly not staying up to the point where they would move inflation expectations above 2%," Powell said in a videoconference hosted by The Wall Street Journal.

There's "good reason" to assume the economy will soon make progress toward the Fed's goals of maximum employment and above-2% inflation, he said. Still, it will still take "some time" to see movement that warrants a policy adjustment, Powell added.