Fed Governor Michelle Bowman said in a speech, “as the recovery in the labor market and spending on goods and services continues to gain momentum, we are seeing upward pressures on consumer prices.”

“This rise has reflected, in part, the fact that inflation numbers at the onset of the pandemic were very low,” she added. “But there is more to the recent rise in inflation than just these measurement issues.”

“The impressive upswing in economic activity has played an important role as it has led to a number of supply chain bottlenecks and put upward pressure on prices for many goods,” she said. “These upward price pressures may ease as the bottlenecks are worked out, but it could take some time, and I will continue to monitor the situation closely and will adjust my outlook as needed.”

Full speech here.

Fed Chair Jerome Powell insisted in a House panel hearing that “we will not raise interest rates preemptively because we fear the possible onset of inflation.” Instead, “we will wait for evidence of actual inflation or other imbalances.” He reiterated that the transitory factors that pushed up inflation should “resolve themselves” in the coming months. And, “they don’t speak to a broadly tight economy and to the kinds of things that have led to higher inflation over time.”

“I will say that these effects have been larger than we expected, and they may turn out to be more persistent than we have expected,” he explained. “But the incoming data are very consistent with the view that these are factors that will wane over time, and inflation will then move down toward our goals and we’ll be monitoring that carefully.”

“You have a central bank that’s committed to price stability and has defined what price stability is and is strongly prepared to use its tools to keep us around 2% inflation,” he said. “All of these things suggest to me that an episode like what we saw in the 1970s … I don’t expect anything like that to happen.”

Cleveland Fed President Loretta Mester said, “I would like to see financial stability considerations explicitly incorporated into the monetary policy framework, with an acknowledgment that nonconventional monetary policy has the potential to increase the risks to financial stability.”

“Monetary policymakers need to be clear-eyed that the actions they take to achieve monetary policy goals, while most often complementary to fostering financial stability, can at times contribute to financial stability risks that could jeopardize the achievement of monetary policy goals over time,” she warned.

Nevertheless, she added, “I don’t think we’re at that level where we’re facing that tradeoff between, you know, macro policy tools needing to be dialed back because of financial stability risks.”

New York Fed President John Williams said he’s expecting real GDP to grow by 7% this year, and 3-3.5% next. Unemployment rate is seen as coming down to 4.5% by year end. He reiterated that the sharp rise in inflation is “mostly temporary”. He’s expecting inflation to be at around 3.5% this year and to come down next year.

Williams also emphasized that right now, it’s “really about watching the data and seeing how quickly the economy can recover.” The timing of slowing down the pace of asset purchases will be “driven by data”.

“One of the lessons of the taper experience from years ago is the importance of getting the right time and communicating transparently to the public,” he added.

In the prepared remarks for Tuesday’s testimony, Fed chair Jerome Powell said the economy has shown “sustained improvement” with real GDP on track to posts its “fastest rate of increase in decades”. Labor market have “continued to improve”, but the pace has been “uneven”. Unemployment rate remained “elevated” at 5.8%. But job gains should “pick up in coming months” as vaccination rise. Powell also reiterated that as the “transitory supply effects abate, inflation is expected to drop back toward our longer-run goal”.

Separately, New York Fed President John Williams said the economy is “improving at a rapid rate”, and the “medium term outlook is very good”. However, “data and conditions have not progressed enough for the FOMC to shift its monetary policy stance of strong support for the economic recovery.”

St. Louis Fed President James Bullard said the US is “in a much stronger position with respect to reopening we would have anticipated and inflation has come along with it.” He warned that “we have to be ready for the idea that there is upside risk to inflation and for it to go higher.”

Regarding tapering, Bullard said “the playbook from the aftermath of the global financial crisis may not be the same one we use in the aftermath of the pandemic.”

“I don’t think we are in the quiescent, low volatility period we were in the aftermath of the global financial crisis. Instead we are in a high volatility many things happening at once situation and because of that we have to be able to react,” he added.

Dallas Fed President Robert Kaplan said “when we got to March it was clearer that we were going to get the pandemic under control”. And, “by the time we get to June…you’ve really got a big upgrade” on economic outlook. A majority of Fed officials expected rate hikes in 2023. That’s “monetary policymakers simply reacting to the dramatically improved economic outlook.”