Powell says US Fed will have to raise rates more if inflation remains elevated

WASHINGTON - US Federal Reserve Chair Jerome Powell said on Tuesday that the central bank will have to raise interest rates more if inflation remains elevated.

"If we see inflation persisting at high levels longer than expected ... if we have to raise interest rates more over time, we will," Powell said at his confirmation hearing before the Senate Banking Committee, noting US inflation is running "very far above" the central bank's target of 2 percent.

"The economy no longer needs or wants the very highly accommodative policies we've had in place to deal with the pandemic and the aftermath," Powell said.

"We're really going to be moving over the course of this year to a policy that's closer to normal. But it's a long road to normal from where we are," said the Fed chief.

The consumer price index rose 6.8 percent in the 12-month period ending in November, the fastest annual pace in almost 40 years, according to the US Labor Department.

"We know that high inflation exacts a toll, particularly for those less able to meet the higher costs of essentials like food, housing, and transportation," Powell said, adding the central bank will use its tools to prevent higher inflation from becoming entrenched.

Fed officials' median interest rate projections released mid-December showed that the central bank could raise the federal funds rate -- the benchmark interest rate -- three times this year from its current record-low level of near zero, up from just one rate hike projected in September.

US President Joe Biden announced in November that he intends to nominate Powell for a second term as Fed chair and to nominate Fed governor Lael Brainard as vice chair. Biden is also expected to soon nominate three new governors to fill remaining vacancies on the seven-member Fed board, according to local media.