July 20, 2021: -On Wednesday, Federal Reserve Chairman Jerome Powell said that the economy needs to improve more before the central bank changes its ultra-easy monetary policy.

In remarks prepared for the House Financial Services Committee, the central bank chief noted improvements. However, it said the labor market, in particular, is still well below where it was before the Covid-19 pandemic hit.

Powell noted that the Fed’s benchmark of “substantial further progress” toward full employment and stable prices remains “a ways off.” He did remark that Fed officials at least are talking about reducing the pace of asset purchases.

On inflation, Powell said it “has increased notably and will likely remain elevated in coming months before moderating.”

Multiple members of the House committee pressed him on the current inflation trends. But he stuck to his oft-stated belief that the recent surge is temporary and will be offset as conditions return to normal. He stressed that much of the current price pressure comes from a few industries, such as used cars, sensitive to temporary needs.

“It’s all kind of the same story. It’s a shortage of semiconductors. There’s also very high demand for various reasons,” Powell said in response to a question from Rep. Madeleine Dean, R-Pa. “It’s just a perfect storm of high demand and low supply, and it should pass. Unless we think there’s going to be a multi-year, many-year shortage of used cars in the United States, we should look at this as temporary. We very much think that it is.”

Pushed during the hearing to explain what “substantial further progress” will mean, Powell said that in regards to employment, “it’s a complicated thing to be precise about.”

“It is an extensive range of things,” he added. He said the Fed “will provide lots of notice” before it considers tightening policy.

Markets have been watching Fed communication for indications about when the central bank will begin tapering its minimum $120 billion a month in bond purchases as it keeps interest rates anchored near zero.

Powell noted that the two policy measures “along with our strong guidance on interest rates and our balance sheet, will ensure that monetary policy will continue to deliver powerful support to the economy until the recovery is complete.”