case. that is one of the arguments that are offered in favor of digital currency. you would not need stable coins, you would not need crypto coins if you had digital u.s. currency. representative: madam chair, i yield back. rep. waters: the gentleman from ohio, mr. gonzalez, is now recognized for five minutes. representative: thank you. i want to pick up where my friends left off. i want to focus on the unemployment piece. when i tucked my businesses back home, the two biggest issues that they face, in particular small businesses, employment, not being a bowl -- able to get you back to work, and inflation. with respect to unemployment, in the monetary policy report, you

cite several factors are keeping people out of the workforce, most of which were virus related -- early retirement, caregiving, fear of covid, and employ meant benefits. using those factors that you cited as responsible for on appointment, you agree that the factor is not a primary driver of getting people back to work? do you think if you lowered negative interest rates at that would materially change the unemployment rate? chair powell: i would agree that the most important thing that she will be very important if we were -- it would be very important if we were to see a significant increase in labor supply. just showing up in the form of matching in the labor market.

their jobs and unemployment people, but they do not seem to match up. [indiscernible] representative: the rate of interest. that is important, because the commitment is to keep rates at zero until we get back to full employment, it is inflating asset bubbles, pushing people further out of the risk curve. i would argue it is creating systemic risk and -- in a variety of markets. i would encourage you to consider that. having onto the inflation bit. the comment from the fed is that inflation is transitory. you will maintain rates at zero until inflation is moderately above 2% for "sometime." how long is "some time"?

what factors are you looking at those how you of this is transitory or more systemic? chair powell: even after this expected wave of supply, it is likely that we will still be short of maximums -- employment. at that time, support for demand would be appropriate. we think it will take some time, even after this. getting to your inflation question, basically, how long is "some time"? chair powell: the answer is it depends. right now, inflation is not moderately above 2%. it is well above. it is nothing like moderately. the question will be -- and

this'll be the question for the committee -- where does this leave us in six months or so, when inflation is we expect does move down? how will that part of the guidance work. it will depend on the path of the economy. it may be that we will look back , it may be that we won't representative: i want to switch to stable coins and pickup for mr. mchenry left off. in recent months, there has been increased scrutiny of this stable points, particularly the amount backed by commercial paper, as opposed to u.s. dollars. it does create a challenge, in that we need to take seriously when people run from these instruments very quickly. do you share these concerns? is out the sort of thing that you will be looking at and providing guidance on? chair powell: yes.

commercial paper, our short-term overnight obligation for companies. most of the time, it is all good. but in both of the last two -- during the acute phase of the crisis, that is on people will want their money. it is simple. these are economic activities that are very similar to thank the positives and money market funds. they need to be regulated. rep. waters: thank you. the gentleman from new jersey is now recognized for five minutes. representative: thank you. thank you, chairman powell, for being here today. the 2017 tax bill raised taxes

for the geordie families in my district. these are young people tried to start a family. all groups are struggling in this pandemic and out trying to get back on their feet. and you were before this committee earlier this year, the treasury secretary said that the salt cap lead to disparate treatment. she would work with me to ensure that the inequities would be remedied. is increasing a crucial tool to stimulate the pandemic -- the economy and bring businesses back from the pandemic? chair powell: we have really important jobs and powerful tools, but one of them is not fiscal policy. we do not want to play a role. chair powell: i figure though beer answer, but i was going to ask anyway. turning to inflation.

given the movements we are seeing in inflation across commodities, housing, wages, should we be concerned about what happens to long-term interest rates once the fed stops purchasing elongated treasuries? what will happen to the economy? chair powell: i would not want to make a forecast. it is very hard to forecast long-term rates. if any would have been able to forecast we would have been able to are a what we have borrowed in the last 10 years, the treasury would be a 1.4%, no one would've forecast that. there is tremendous demand for u.s. treasuries around the world. we are this safe asset, the reserve currency. in any case, our role is maximum employment and price stability, not fiscal policy. representative: the fed is the largest buyer.

you'd not think that long-term rates will go up? chair powell: honestly, they may not. markets work through expectations. if markets foresee what we are going to do, presumably, to some extent, what we are already -- what we are going to do chari to be baked in. one of the reasons we are being so transparent is that markets will incorporate the timing and form of the taper that we will ultimately undertake, because we will have communicated it well in advance. representative: thank you. you said that one of the causes of inflation is some supply bottlenecks. some of these issues are being attributed to strangers on supply chains because of america's infrastructure. would you agree that the bottlenecks would be alleviated in part through the robust,

direct investment in infrastructure, addressing our issues with roads, rails and that funding long-term infrastructure would help keep inflation under control? chair powell: i would not want to be seen as supporting any particular bill or form of spending. i do think it is clear, though, that investments in good infrastructure can add to economic potential, provide the money -- provided that the money is well spent. but it is not appropriate for me to get involved in these discussions. representative: i understand. the bipartisan infrastructure package to try to get our investment into law and our economy back on track. i believe that will help deal with some of the challenges we are facing and make these investments in roads, bridges, rail, energy, broadband all

crucial to ensure that america remains competitive on the global stage. last question. china spent about 3.7 trillion dollars in infrastructure outside the u.s. last year. are you concerned at all about china's activity on this front? [indiscernible] [indiscernible] [indiscernible] representative: thank you so much. rep. waters: thank you. you forgot to add housing. representative: sorry. i meant to that. you are right. rep. waters: that gentleman from tennessee is now recognized for five minutes. representative: thank you.

thank you, chairman powell, for being here today and for your leadership. chair powell, in november, the fed took important steps to provide temporary relief for certain community banking organizations who experience an unexpected and sharp increase in assets due to their participation in federal coronavirus response programs, such as a paycheck protection program. that regulatory relief is in effect until december 31 of this year. since i deadline was put into place, the biden administration and house democrats past eight to trillion dollar bill that will have an impact that extends past the year. do you believe that the end of year deadline is sufficient? would you be open to extending the regulatory flexibility past that date? chair powell: i do not know.

i would be happy to take a look and get back to you. i am well aware of the programs and of the deadline, but i do not have been informed view of whether they need to be extended, but i will look into it. representative: i hear constantly as i visit with community banks back hear in tennessee -- back here in tennessee that regulatory costs are one of their top expenses. this brings up the broader question if we should be looking into permanently raising the threshold for increased regulatory and reporting standards for community banking organize stations -- organizations. is that something you support? chair powell: i would have to look at that. i will say that we are very well aware of the pressures that are added to community banks because of fixed regulatory costs. you need to be bigger with fixed

costs. we try hard not to be part of the problem. we see community banks under pressure. we see the number diminishing. we have a subcommittee led by governor bowman, a former banker, that is designed to stop that sort of thing from happening is something we work on all the time. representative: i would encourage you to do that and look at those thresholds, because what i hear repeatedly and as a former director of a small bank, it appears that the dramatic increase in assets, resulting from the fiscal stimulus and other measures, may not be as transitory as we would have first expected. and yet, it has increased the balance sheets of these banks dramatically. i hope you will take a look at that. in june, and employment rate was 5.8%, a far cry from the 3.5% pre-pandemic. labor force participation has

not moved up from the low rates that have prevailed for most of the patched year -- the past year. you write that enhanced unemployment benefits have allowed workers to reduce the intensity of their job search. you believe that the most recent stimulus in the american rescue act is the reason for prolonged high unemployment rates? has it in fact slow down our economic recovery? chair powell: there are a bunch of factors. four or five. mr. gonzalez or somebody went to them. it is hard to untangle them. it may be that unemployment insurance enables people to look a little bit longer and try to find a better job. in the long run, that will be better for the economy. we will find out, though, because enhanced unemployment insurance will be gone -- [indiscernible]

[indiscernible] [indiscernible] representative: -- stifled our economic recovery. chair powell: that would seem to be a question for you, really. again, i do not comment on fiscal policy. i will leave that will with you. representative: switching gears. i want to talk about the g7 surcharge. tilt the pandemic, our largest banks remained strong due to high asset quality and robust liquidity position. i believe over the years the surcharges worked at is intended. if then she sips do not maintain

their position, it could undermine our economy. i yield back, madam chair. rep. waters: thank you. the gentlewoman from pennsylvania, ms. dean, is now recognized. representative: chairman powell, it is always good to be with you and to learn from what you are doing. i think you for your study leadership and stewardship, but maybe it never so important as over the course of the last 18 months. i also thank you for your recognition that this recovery has not been even. free growth in our economy in really robust ways. i appreciate that you recognize it has not been even across all sectors. i wanted to continue the conversation around inflation.

i say this is somebody who wants to be able to translate this to my constituents. i prefer plain english any we can. i really appreciate your testimony around inflation, but if we talk about supply chain the vulnerabilities that come in as a result during this economic reopening, the supply chain manufactures goods, driving what it calls transitory inflation. you cite in your testimony the car industry. the biggest example may be the price of used cars, up 10% in april alone. a number of factors. one in particular is worldwide shortage of semiconductors, slowing down the rate of new car manufacturing. therefore, driving dealers to have fewer cars on the lot and buyers moving toward preowned. all of these things inflationary. what are your thoughts?

how can i explain this to my constituents around this level of inflation in these smaller groups? what should we be watching? if you could, in plain english, what is the fed doing about this transitory inflation? chair powell: we always have the issue. central banks generally always have the issue of looking at price increases and asking whether they are really threatening inflation. by inflation, we mean year after year after year, prices go out. something is a one-time price increase, you do not react with monetary policy. the way monetary policy works is by slowing down the recovery and reducing inflationary pressure. you would not react to something that is likely to go away. we have to look at this current situation where we have a number of categories where inflation is moving up hot -- higher than

expected and a little more persistent. but we look at them and at the story. the story that you mention around used cars and new cars and railcars. it is all kind of the same story. there is a shortage of semiconductors. also high demand. people are using less public transportation. they have money because they have not been able to spend. it is the perfect storm of high demand and low supply. it should pass. unless we think there's going to be a multi-year of used cars, we should look at this as temporary. we very much think that it is. so do all of the forecasters i have seen. think that these price increases for used and new cars will top out and, in all likelihood at some point, decline. representative: i appreciate

those recommendations and what your actions are. is this a time when you see this transitory inflation a need for greater public and private investment? chair powell: investment raises the potential growth rate of the country and makes workers more productive and companies more productive and countries more productive. that raises living standards. more of it is generally better, as long as it is money well invested. it is worth looking seriously at. at any time. representative: i would not call any of the things we are trying to do irresponsible spending. you have demonstrated and the economy is demonstrating that our investment has been responsible spending to the growth of our economy, to the growth of working-class

families. i want to pivot another thing i carry very much about -- care very much about. credit rating agencies paired last session, i had the opportunity to work with chairwoman waters, representative bar, to introduce hr 6934, which requires the fed to treat all nationally recognized statistical regions -- eight statistical rating agencies uniformly. i do not know if you would be able to speak to the [indiscernible] of expansion. chair powell: at the very beginning of the crisis, we really had to get these facilities up and running. we worked with the big three. we then consistently expanded over and over again. expanded the group of agencies that we with. we talk about this more off-line if you would like. rep. waters: the judgment from

wisconsin is now recognized for five minutes. representative: thank you. i want to stay on the topic of inflation. i am a bit of a broken record on this issue. it is so important to families across our country. the prospect of rising inflation , i brought this up maybe last july, last december, in those meetings you continued to suggest you're not ready to take action to head off inflation. yesterday, we received more data confirming that prices are continuing to rise. inflation is not an abstract concern. although the white house social media team put out information that a fourth of july barbecue went down $.16 from last year, families are seeing rapid price increases with their own eyes. i know it is not your role to comment on fiscal policy, but i am very concerned with president biden's spending plans and its impact on inflation. last month, increase of consumer

prices of 5.4% with the largest jump that we have seen is august of 2008, right before the financial crisis. over the past year, used cars have gone up 30%. shoes are up 7%. we have seen increases in coffee, sugar, protein pain -- propane, all double digits. we have added to the price of a new home. you have responded to inflation concerns i saying that increases are temporary and will subside as a supply chain and labor markets return to normal after covid. but even if it is partially a case that inflation expectation may be changing and rising the prospects of a more persistent impact, a poll showed that 87% of americans are concerned about inflation. can you comment on how the fed responds to signs that consumers

are getting to expect more persistent inflation? chair powell: we monitor. we think inflation expectations are very important. if businesses and households think inflation will be 2%, it probably will be. because they will demand that. we monitor inflation expectations, surveys of households, surveys of experts. the market, as you know, you can get inflation compensation readings out of the difference between tips in regular treasury. they all went down as a group at the beginning of the pandemic, which is not good. they have all moved back up as a group. just about tread level that i would say is consistent, in the range of consistent, with eric to percent inflation goal over time. -- our 2% inflation goal over

time. we watch this very carefully. representative: i want to build in to the distinction between transitory and persistent inflation, and in particular its impacts on home prices. home prices have risen more than 14% over the past year, a very significant increase. it is enough to put homeownership out of the reach of some americans. meanwhile, the fed is continuing to buy about 40 billion in mortgage backed securities. inflate -- if inflation is temporary, does the potential represent a potential for a reset on housing prices? if so, what is the impact on homeowners? chair powell: housing prices do not go directly into inflation. housing is an asset. housing prices are not a factor in inflation. what is a factor is rents.

what economists do is they take the value of a home and impute a rental cost to them. housing prices went up 15% last year. that is too much, much higher than normal. i don't know housing prices will do in the future, that there is a lot of demand. people want to live in the suburbs, want to move out of cities. want bigger houses. they have saved all this money because they could not travel and go to restaurants. there is a lot of demand. even if mortgage rates go up, so ultimately well, i think we will be looking at a lot of demand. then the question will be how much supply can be brought to the market? that is out of our control, but if you look around your district, it is a question of zoning, materials, labor. representative: if we is zero into the material costs, about a

$36,000 increase in costs, they will continue this discussion off-line. i appreciate your time. i yield back. chair powell: i would be glad to do that. rep. waters: that gentlewoman from north carolina is now recognized for five minutes. representative: thank you. [indiscernible] on inflation [indiscernible] in recent months. this may be temporary. these bottlenecks have had real-world consequences. for example, my local housing partnership had to pause the

construction of affordable housing because of a funding gap caused by the spike in lumber prices. while lumber prices can be tied to the previous of ministrations actions, i know many are still concerned about the rise in prices. i am hoping you can help with these concerns. why do you believe that region inflation -- recent inflation trends are temporary? chair powell: all these industries kind of shut down more than a year ago on the expectation that we were looking at a really difficult time. sooner than expected, the economy is reopened. demand for housing and for many other things, cars, is really high because people safe. they saved money with all the congressional fiscal support.

more than hundred percent of income lost was replaced for the consumer is in very good shape to spend. there is a lot of demand, but on the supply side, it is hard. they cannot build enough houses. there is not enough lumber. he mentioned lumber prices. lumber prices went way up. they have gone way down there they are still twice as high as they were before the pandemic, but they are way off their highs. we do not know it, but we think that will be the pattern for some of these things could they go very high and then come down as of supply and demand come together. as more supply comes online to meet higher demand. we have a very large but ultimately very flexible economy. it will adapt. it is not one of those economies that is rigid. it will adapt fairly quickly, just as it adapted to the pandemic much more quickly and better than expected.

when that happens, we should see -- i will not to the prices will come down, but the level of inflation to read -- will return to more normal levels. representative: even with the an employment rate still elevated near that employers are offering higher wages and incentives to get workers back to work, i always said working hard isn't enough if you don't make enough. what do you attribute to the -- incentives to reenter the workforce and does the fed view these conditions as savable? >> there clearly is a very high level of demand for people to come in his jobs and for whatever reason, people are

taking a little bit of time to look at maybe for a better job. these are people who were working in 2020. these are people who want to work. they may be taking a little bit extra time in many cases to work -- look for a job that pays better or their preferences for working from home may have changed. they might prefer a job where they could work from home. but we are seeing difficulty in matching jobs and people up. it really isn't a precedent where we can look at the last time this happened. there is no last time. i really think in six months, there will be a whole lot of these people back to work and wages will have moved up for people at the low-end and that's not a bad then. >> thank you for joining us. i yield back.

>> thank you very much. the gentleman from south carolina is now recognized for five minutes. >> thank you for sharing your insight. we have all seen inflation numbers. some say it's only temporary. i think any economic observer realizes that usually with eggs like this, there is not a single issue causing our trouble but several converging factors. what is most frustrating to me is despite the real inflation we are experiencing, temporary or not, that has yet to be truly determined. the federal open market committee showed an increasing amount of disagreement on the board of governors on how temporary it may be. what is most frustrating to me

about this entire episode is after all the fiscal stimulus provided to the economy since march of last year -- this congress is seriously considering spending several trillion dollars more than most likely it will nowhere near be paid for. and i know you will not speak to the merits or lack thereof of any specific pieces of legislation and i'm not asking you to but as the chair of the federal reserve were one of your statutory mandates is inflation control, could you provide us with an expectation of the type of inflation we should be prepared for if congress wants to spend another $3 trillion?

>> that is not something i can do on the spot. >> we would certainly not have transitory inflation if we poured that amount of fiscal gas on the fire. i also think the labor shortage we are seeing is a big piece of this puzzle. dozens and dozens of his is in my district cannot get people to return to work and have critical businesses in their supply chain with the same problem. this is creating scarcity results in higher inflation. in south carolina we are returning to work at a drastically higher rate than the rest of the country. a recent survey showed that 1.8 million people have turned down work because of the overly generous unemployment benefits and that's a large chunk of that 9 million person labor -- -- and

many states are in place through september? >> that's already happened. those will be expiring by the end of september. essentially all those benefits will be gone in many states they are already gone. we will see that. never affect those things are having now, it won't last much longer. >> south carolina relies on businesses in other states. it's creating a problem for my state so i just think we have created a disincentive to return to work and that's not good. one last question on inflation. if the fed were to move to increase interest rates, one result would be the increased that service cost to the federal government's $30 trillion plus debt. is that a factor you would take into consideration when deciding

to potentially change the benchmark rate? >> absolutely not. >> so hundreds of billions of dollars of increased cost to our debt service is not a factor in that? >> no. the market will anticipate that we are raising rates so it's probably baked into some pretty significant step. secondly, we borrow all across the curve. we raise short-term rates, it doesn't necessarily have a big effect on the government's costs very quickly. they're here to achieve maximum employment, price stability, supervise the banks, look after the payment system. we are not in a position of considering -- the united states doesn't have to be in a position where that kind of consideration that's into mullen to -- monetary policy and it will not. >> the united states doesn't have to right now.

hopefully we are always in that position. i have a couple questions on cybersecurity. i will submit this for the record. >> we were just hearing from the republican representative william timmons of south carolina. the chairman of the financial services committee maxine waters now representing the next representative who is the democratic representative from massachusetts. jerome powell fielding some questions about fiscal policy and its impact on inflation. he is having to dance around those quite craftily. >> trends over the last 25 years have been increasing returns to capital relative to the returns to label. -- labor. there have been a lot of good areas about why that's happening from undermining workers organizing power to increased automation technology.

it's clear it would require a discontinuous event to break that trend. we are seeing that businesses that are striving to get people back into the labor force and back to work are offering higher wages, better flexibility. quantitative and non- quantitative renumeration for employment do you think the covid-19 pandemic could be a discontinuous event that could actually change the balance between return to label -- labor versus return to capital and could give a secular jolt the workers bargaining power? >> there are so many things that are possible. a lot of what we have seen is just increasing returns to education and people with relatively low skills in education having relatively low -- having stagnant incomes and

wages and people at the high-end with lots of education receiving very high levels of compensation. a lot of that is productivity is amplified by knowledge and the ability to use it and globalization. there are a lot of factors that go into that. the pandemic will do a number of things, but it will be hard to assess each weight will point. it's a good conversation to have. >> certainly that's been evident in massachusetts in the life sciences in clean energy.

[inaudible] particular, to think they can have persistent -- at the lower end getting paid more. it would be hard for anybody to be against that. what we are seeing is people going into jobs in the service sectors which tend to be relatively low paid. that's where we are seeing the pay increases. it would be hard to say that's a bad thing in and of itself. you would want to see people getting paid well who are at the bottom end of this income spectrum. everyone was celebrating when wages were going up more for people in the bottom quartile in the last couple of years.

i don't know anyone who didn't celebrate that. so it's possible. >> how concerned should we be -- let's put forward as a premise that we do see some of that wage inflation, how concerned should we be that inflation for basic staples would eat up that increased purchasing power and be a net negative? >> it's hard to say. a lot of service companies to operate on a relatively modest margin. these are hard questions to answer in the abstract. part of what's happening is there will be more automation in these jobs and we are seeing that. we're going to find out how much those jobs can be done with automation because we have been hearing this for a year and a half, his misses are really looking hard at that now. over time, that can make people

who remain in the jobs more productive and their wages can go up as a result. >> i appreciate your time. i will yield back. >> that was the democratic congressman of massachusetts asking the fed chairman about wages and the downward pressure put on them. chairman powell saying everybody was celebrating wages increasing from the bottom quartile. the next question will come from representative frank lucas. let's listen in to what he is asking of the fed chairman. >> -- the dustbowl in western oklahoma in the southwest. my parents were young men and women in the 1950's. my father was convinced that this was the last rain and it

would never rain again. i was a college student in the 78, 82 period and when your predecessors decided to strangle inflation out of the system, it was really hard on me and a lot of people across this great country. so like my parents and grandparents, as i see this 5.4% year-over-year number, i'm nervous about this. when i borrowed kelsey money in 1981, that made an impression on me. so my question to you is how much longer can we sustain numbers like this before you become nervous? >> as i said before, we do expect that we will be able to see whether the the narrative we

are feeling turns out to be right and i would say we will be able to see that, it won't take forever for us to be able to see that and if we do see that inflation expectations are moving up or inflation is on a path to remain well above our goals and risk of setting us off on high inflation, we will use our tools to guide inflation back down. so in the end it will be transitory and people need to have faith in the central bank that we will do that. but we won't do it just because honestly it would be a mistake to do it at a time when we really do believe and virtually all forecasters do believe that these things will come down of their own accord as the economy reopens. it would be a mistake to act prematurely so we really have to weigh the risks and a certain point the risks may flip.

>> i appreciate that, mr. chairman. understand i will sleep with one eye open until these numbers begin to come down. if not, you will realize like your predecessors that you have to take the necessary action. you made clear that the federal reserve expects the labor force participation to gradually improve. the monetary policy report also highlights that maximum unemployment could look much different than it was prior to covid-19. could you discuss what you see as the potential on lasting effects of the labor market and how the fmo see will approach the question of what maximum employment should be moving forward is the new norm? >> i will say that patients will characterize our approach on that. we saw people staying in the

labor market more than would have been predicted by the numbers. so labor force participation kept moving and to numbers we didn't think people would see again. what we have seen since the pandemic is a wave of retirements. and we won't really know the implications of that for some years. it could just be that that was a catch up for the people who stayed in the labor market. we can't really know what labor force participation is going to be and what the right number is going to be. ultimately you will be able to tell with wages. the real feature of our new framework is that we think if we don't see upward pressure on inflation and on wages, we are not going to say the labor market type even if unemployment

is really low and participation is high. but if we do, that will tell us that maybe it is. there's a degree of humility that forecasters need to have. we have much to be humble about. so this is another area where that's appropriate. >> thank you chairman and chairwoman. i yield back. >> that was frank lucas of oklahoma asking the fed chairman about the persistence of inflation and when he will start to get nervous. eliciting the usual response about the transitory nature. the representative being recognized as the democrat from new york, alexandria ocasio-cortez. >> bottlenecks in pandemic related factors have been one of the primary reasons that lead to price increases with their its

computer chips, complications with delaying the production of new vehicles, prompting a rush on used vehicles, the price of lumber, shipping container logistics. we know these price increases were not caused by changes in interest rates. they were caused by supply chain complications. you have said that these price increases are transitory. >> yes. we think they will be. we lack certainty on that, but we do believe that's the case. >> if drivers of inflation are supply chain issues, do you think that these issues are best resolved through investments making that supply chain more resilient or higher interest rates? >> if we see things that are

temporary or transitory and that should move through and go away because they are associated with the opening of the economy, it would be inappropriate for us to tighten policy, the point of which is to slow down economic activity. >> recently the bls reported that the first three months of 2021 where the best quarter of wage growth since at least 2001. my concern to be frank is that a misplaced diagnosis playing out with inflation could cause the federal reserve to prematurely raise rates and -- employment gains that has been beneficial to millions of americans. this means if we do take that step back, millions of americans will be left with limited opportunities to be employed at an adequate and livable wage. the fomc is projecting multiple

interest rate increases before the end of 2023 and before they project achieving the pre-pandemic unemployment rate. the median fomc numbers projection of the longer run unemployment rate was about 4%. >> that's right. >> before triggering the pandemic, the unemployment rate -- rather before the pandemic, the unemployment rate reached 3.5% without triggering inflation. >> that's right. >> in 2019 despite some pickup in wage growth, there didn't appear to be signs of the economy overheating. the benefits of long expansion are only now reaching many communities and there's plenty of room to build on the

impressive gains achieved so far. if there was still room to expand in the months before covid, that suggests that with time the economy can return to a trend of gdp unemployment above the one experienced during the crisis. do you believe this to be the case, that the longer run implies that 3.5 percent is too low and do you think we will be able to reach lower unemployment and higher label -- labor force participation? >> i think we will be able to get to 3.5% unemployment. participation is very much affected -- i'm quite sure we can get to high levels of participation. >> to disaggregate this line between monetary and fiscal policy -- the world bank

recently summarized estimates from market forecasters that the united states may be the only country that will leave the pandemic with higher gdp than pre-pandemic projections had estimated. gdp will actually be higher as a result or after covid -- would you say that some of the fiscal policy interventions like the american rescue plan have played a role in that outcome? >> yes. the forecast of many is that by the middle of next year will be above the prior growth trend which is an incredible achievement and i attribute it to the cares act and the fiscal policy.

>> that was democratic representative alexandria ocasio-cortez asking about the supply chain as well as long-term trajectory of the employment rate. powell says he believes we can get back to 3% unemployment and participation. >> i'm not hearing mr. sessions. >> is that better? >> that's better. >> thank you very much modem chairman and it's good to see. i wanted to have you take the majority of my time to talk with us about your 12 regional banks and what they are seeing across the country for recovery. as you see it in these banks

reporting their successes and the things they see as things that are inhibiting or causing you to think about your international plan around the country. >> he would like me to talk about that a little bit? this is one of the great features of our system is we have 12 reserve banks around the country. they are in every community in the country and they extract a lot of data. the story they're telling is like what we've been talking about today.

you have very fast growth and a lot of money seeing anything like this. they bring back reports about that. businesses have a hard time finding people. people are looking for better jobs. there's also a lot of unevenness. you still have sectors in since the global financial crisis. people see price pressures broadly across the country. if you look at our beige book, raw materials and to some extent

in wages you will see that as well. we really do get a very nuanced picture around different sectors of the economy which i think is a tremendous benefit to our policymaking process. i hope that's helpful. >> -- people get out and work. and i want to join my colleagues in saying first of all thank you for taking time to be before the committee today again. but in that process i hope there is healthy debate that you not only encouraged within your system but you also recognize that there are a good number of republicans who believe that the government propping up the system is inhibiting actually

people taking jobs. getting back to gdp as opposed to consumer price index raises and that we really see that the short and long-term answer would be people getting jobs, going back to work, schools reopening. the success of not only the market place but the stability of america as we have known her. and i appreciate taking time today. i will be interested over the next few months that your evaluation about what is working and what is not working if you are able to spot that in markets and actually give feedback to states and governors and the president and certainly this committee on the factors that seem to be successful. i think that success that you have said today is getting us to a 2% inflation rate.

i don't have any problem with that at all. i could buy that. getting to necessarily cost because somebody wants a better job we have people leaving, i think we need to point to successes and i hope one of those factors is also employment. i want to thank you for taking time and madame chairman, i would go back my time. >> the gentleman from new york is now recognized for five minutes. >> thank you for being with us. i have a few questions largely on a recent new york times op-ed . it points out that lower interest rates benefit those with assets, thereby deepening inequality. do you agree with that assessment? >> no, i don't agree with that assessment.

the bottom line with interest rates is that low interest rates support a strong labor market. they support demand and a strong labor market. you saw this during the course of the last long expansion. and all of the people that we talked to and we talked to many any people out in the country who either live in or represent low and moderate income -- moderate income communities are both and they never come in and say you should raise interest rates. what they hear is we really like our policy. -- what we hear is they really like our policy. that goes in the direction of having a supportive monetary policy, so that's really what i would say to that. wealth inequality is something that goes up over the course of a business expansion because people who own homes and

businesses and stocks and bonds and things like that, they are going to benefit in their wealth. does anyone seriously argued that we should try to stop that from happening by raising rates at the cost of putting people at the bottom end of the income spectrum back to work? of course we wouldn't do that. i think we're doing the right thing and giving people a shot to get a good job and that a good wage and accumulate that wealth. >> in the same op-ed, she points out that companies are taking out cheap debt not to finance investments but rather to finance larger projects and stock buybacks. what's your response to that argument? >> i think businesses make rational decisions generally about what they should invest in . what that has to do with monetary policy is not clear to me. i see an economy that