Federal Reserve Chairman Jerome Powell said on March 4 that he expects inflation to increase temporarily in response to a rise in economic activity. However, he added that the inflationary pressures won't be enough to push the central bank to raise interest rates.
"We expect that as the economy reopens and hopefully picks up, we will see inflation move up through base effects," Powell said during a Wall Street Journal conference. "That could create some upward pressure on prices."
Markets reacted negatively to Powell's comments, as stocks faltered and Treasury yields increased.
The Fed is currently buying $120 billion per month in Treasurys and mortgage-backed securities.
According to Fed officials, the central bank is nowhere near any action to influence the long end of yield...