particularly you wouldn't need stable coins, you wouldn't need cryptocurrencies if you had a digital u.s. currency. i think that's one of the stronger arguments in its favor. >> that's great. madam chair i yield back thank you. >> thank you very much the gentleman from ohio, mr. gonzales is now recognized for five minutes >> thank you, madam chair, and thank you chairman powell. i want to pick up and focus on the unemployment piece frankly when i talk to my businesses back home where i'm currently seated, the two biggest issues they face, in particular small businesses, employment, not being able to get people back to work, and inflation. so, a timely hearing right in your wheelhouse. so, first with respect to unemployment, in the monetary policy report, you cite several factors that are keeping people out of the work force, most of

which were virus related early retirement, care giving responsibility, fear of covid and expanded unemployment benefits using those factors, which you cited in the monetary policy report as responsible for diminished employment, would you agree that the zero interest rate posture is not a primary driver of getting people back into the work force today? and maybe said differently, do you think if you lowered this to negative interest rates that would materially change the unemployment rate? >> let me try to answer that this way i would agree with you that the most important thing -- it would be very important if we were to see a significant increase, as we expect we will see, in labor supply it's just showing up in the form of better matching in the labor market there are all these open jobs and many, many unemployed people, but they don't seem to be matching up in any case, as those factors

wane, we should see more of that that's probably a first order importance at this time. >> okay. so, the rate of interest and i think that's important because the commitment is to keep rates at zero until we get back to full employment. but we know what's happening is it's inflating asset bubbles, it's pushing people further and further out on the risk curve. i would argue it's greating systemic risk in a variety of markets. so, i would just encourage you all to consider that now, moving on to the inflation bit. the common referring from the fed is inflation is transitory, there's nothing to worry about, and you will maintain rates at zero until inflation is moderately above, quote, 2% for some time. you've said that a number of times. we're looking at the previous month at over 5% so, how long is, quote, some time, and what factors are you looking at that will tell you whether this is transitory or something more systemic?

>> okay, look, let me say first on maximum employment, even after this expected wave of supply comes, it's likely that we'll still be short of maximum employment and at that time support for demand will be appropriate so, that's why we wouldn't see that it's time to raise interest rates now. we think it'll take some time even after this. so, getting to your inflation question -- >> which is basically how long is "some time" >> so, that will be -- the answer really is, it depends you're really asking about that part of the guidance and how do we think about that. right now, of course, inflation is not moderately above 2% it's well above 2% and you know, it's nothing like moderately so, the question will be -- and this will be a question for the committee. the question will be, where does this leave us in six months or

so when inflation, as we expect, does move down how will that part of the guidance work? and it'll depend on the path of the economy. it really will it may be we'll look back and see this having been met and maybe we won't but we're not going to address that right now, but it's a good question >> okay. thank you. i want to switch to stable coins, specifically on tether. so, in recent months there's been increased scrutiny to tether due to assets backing the coin, particularly the amount backed by commercial paper, as opposed to u.s. dollars. president rosen grin said that tether does create a challenge and we need to take seriously what happens when people run from these instruments very quickly. do you share these concerns, and is that the sort of thing you'll be looking at and providing guidance on with the white paper? >> yes, absolutely yes. commercial paper, short term overnight allegations from

companies, and most of the time it's investment grade. most of the time, they're very liquid, it's all good. but in both of the last two financial -- during the acute phase of the crisis, the market just disappears. and that's where people will want their money it's very simple these are economic activities that are very similar to bank deposits and money market funds and they need to be regulated in comparable ways. that's how i see it. >> i yield back. >> thank you the gentleman's time has expired. the gentleman from new york -- i'm sorry, from new jersey is now recognized for five minutes. >> thank you, chairman waters, and it's definitely jersey >> yes >> thank you chairman powell for being here today the salt production cap jammed through congress raised taxes for majority of families in my district these are my communities teachers, first responders, small business owners, young

people trying to start i family, all folks struggling in the pandemic and trying to get back on their feet. when you were before this committee earlier this year, the secretary said the salt cap led to disparate treatment, quote, and that he would work with me to ensure this would be remedies chairman powell, is increasing disposable income for households a crucial tool to stimulate the economy and ensure our communities see economic activity necessary to see businesses come back from the pandemic and do you think salt is part of that solution, reinstating the salt production? >> so, we have really important jobs and powerful tools, but one of them is not fiscal policy we don't really want to play a role on that i'll have to leave that with you. >> i was going to ask it anyway. i'll turn to inflation since obviously lots of questions today about that given the movements we are seeing in inflation across commodities, housing and wages,

should we be concerned about what happens with long term interest rates once the fed stops purchasing long dated treasuries and long rates go up and what will happen, do you believe, to the economy? >> you know, i wouldn't want to make a forecast. it's very hard to forecast long-term rates. if anybody had forecasted that we'd be able to borrow the amounts that we've borrowed in the last ten years and that the federal funds rate would be -- sorry, the 10-year treasury would be at 1.4%, no one would have forecast that so, it's really hard to say. there's tremendous demand for u.s. treasuries around the world. we are the safe asset. we are the reserve currency. and in any case, you know, our role is to do maximum employment and price stability and not fiscal policy. >> the fed is by far the largest buyer, you know. you don't think long term rates will go up meaningfully when

this occurs? >> honestly they may or may not. markets work through expectations if markets foresee what we're going to do, then presumably, to some extent what we're going to do should be baked in. it's hard to predict market reactions to these things. one of the reasons we're being so very transparent is that markets will incorporate the timing and the form of the taper that we're going to ultimately undertake here because we will have communicated it well in advance. >> thank you you said one of the causes of inflation consumers are facing is supply bottlenecks, strains of supply chains because america's infrastructure is able to take on theincreased demand as the economy reopens would you agree these bottlenecks would be alleviated through the direct investment in infrastructure, addressing our issues with roads and bridges, rails and ports, and that

spending on long term infrastructure projects would help in keeping inflation under control? >> again, i wouldn't want to be seen as supporting any particular bill or form of spending i do think it's clear though that, you know, investments in infrastructure, in good infrastructure, can add to economic potential, provide the money is well-spent. but, again, i don't want to -- it's not appropriate for me to get involved the in these discussions you're having. >> i understand. i will espouse one bipartisan infrastructure structure package that the problem solvers caucus in the house, working with a bipartisan group in the senate, to try to get investment infrastructure into law and our economy back on track. i believe that will obviously help deal with some of the challenges we're facing and making these investments in roads and bridges and rail and energy infrastructure and broadband connectivity, all crucial to ensure america remains competitive on the

global stage last question there, are you -- on the global stage, china spent about $3.7 trillion on infrastructure outside of the united states last year. are you concerned at all about china's activity on this front and the spending they're doing outside the united states? >> you know, the issues of international economic relations are really with the treasury department and the state department, not with us. so, sorry. >> well, i will yield back, chairwoman, my last seconds here thank you so much, chairman powell, for being here today >> thank you >> thank you very much you forgot to add housing. translator: sorry. sorry. you're right, chairwoman from california >> the gentleman from tennessee, mr. rose, is now recognized for five minutes >> thank you chairwoman waters and ranking member mchenry, and

thank you chairman powell for your leadership throughout the pandemic and now during our economic recovery. i'm going to go ahead and dive right in chairman powell, in november the fed took important steps to provide temporary relief for banking organizations who experienced an unexpected and sharp increase in assets due to their participation in federal coronavirus response programs such as the peks preks program that regulatory relief is in effect until december 31st of this year. and since that deadline was put into place, the biden administration, along with house democrats, passed a $2 trillion bill that will have an impact that extends past the end of the year do you believe that the end-of-year deadline is sufficient and would you be open to extending the regulatory flexibility past that date >> i don't know to be perfectly honest i'd be happy to talk a look at that and get back to you

i'm well-aware of the programs and of the deadline, but i don't know -- i don't have an informed view of whether they would need to be extended, but i will look into it. >> fwhilding off of that, i hear constantly as i visit with community banks back here in middle tennessee that regulatory compliance continues to be one of their top expenses or costs so, i think this brings up the broader question of if we should be looking into permanently raising the tloeld threshold for increased regulatory standards for community banking standards. what are your thoughts on that, chair powell is that something you would support? >> again, 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. and we try hard not to be part of the problem we see community banks under

pressure we see the number diminishing. and we have a subcommittee led here by governor bowman, a former banker, that is designed to stop that sort of thing from happening. it's something we work on all the time >> i just would encourage you to do that and look at those thresholds because what i hear repeatedly and as a former director of a community bank in my community, it appears a 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 has increased the balance sheets of these banks dramatically so, i hope you will take a look at that. in june, the unemployment rate was 5.9%, a far cry from the 3.5% pre-pandemic. labor force participation is not moved up from the low rates that have prevailed for much of the past year. in the monetary policy report

you submitted to committee, you write that enhanced unemployment benefits have allowed workers to reduce the intensity of their job search chair powell, do you believe that the most recent stimulus in the american rescue act is the reason for prolonged high unemployment rates and has it, in fact, slowed down our economic recovery? >> so, there are a bunch of factors. there are four or five i think mr. gonzales or somebody went through them. and it's very hard to untangle them but it may be that unemployment insurance, for example, it may be that that enables people to look a little bit longer and try to find a better job and in the long run that will be better for the economy we're going to find out though because the enhanced unemployment insurance will be gone within 60 days and in many states it's gone already so, we'll be able to look at the data it's too early to say. we can't really see a difference between states that have and haven't eliminated that. so, my own suspicion is it's one

of a number of factors and it interacts with the other factors. it will be really hard to get a clear answer on how important that is. >> how could another $3.5 trillion as proposed by senate budget chair sanders further stifle our economic recovery >> that would seem to be a question for you really. again, i don't comment on fiscal policy i'll really leave that one with you. >> switching gears a little in my remaining time, and i want to talk about the surcharge throughout the bank our largest banks remain strong and stable due to high asset quality and robust capital and liquidity positions. i believe over the years the surcharge has worked as it has intended and they do not m maintain cushions, it could undermine our economy.

i see i'm out of time but would welcome your response to the questions off the record >> thank you happy to do it >> i yield back, madam chair >> thank you very much the gentlewoman from pennsylvania, ms. dean is recognized for five minutes. >> thank you, madam chair. and chairman powell it is always good to learn from what you are doing in your role i thank you for your stewardship over the course of your tenure but maybe not as important as the last 18 months and forward i thank you for your recognition that this recovery has not been even while we are recovering growth, i appreciate and recognize it has not been even across all sectors. i wanted to start with the -- to continue the conversation around inflation. and i say this as somebody who wants to be able to translate this to my constituents.

i prefer plain english any time we can so, i really appreciate your testimony around inflation but if we talk about supply chain and the bolder abilities that come in as a result during this economic reopening, the supply chain with manufactured goods driving what is called transitory inflation you cite in your own testimony the car industry the biggest example may be the price of used cars up 10% in april alone, and a number of factors, one with particular worldwide shortages. semiconductors slowing down, the rate of new car manufacturing driving dealers to have fewer cars on the lot and buyers moving more toward pre-owned all of these things inflationary what are your thoughts and how can i explain this to my constituents around this level of inflation in these smaller

groups of goods and services what should we be watching and if you could, again, in plain english, what's the fed doing in terms of this temporary or what might be called transitory inflation >> well, so we always have the issue and central banks generally always have the issue of looking at price increases and asking whether they're really threatening inflation by inflation we mean year after year after year prices go up if something is a one-time price increase, then you don't react to it with monetary policy because frankly the way monetary policy works would be by slowing down the economy, slowing down the recovery and therefore reducing reflationary pressure you wouldn't react to something that is likely to go away. so, we have to look at this current situation, where we have a number of categories and business services where inflation is moving up, as i mentioned, higher than we've expected and a little bit more persistent than we had expected and hoped. but we look at them and we look

at the story and the story with -- you mentioned around used cars and new cars and rental cars it's all kind of the same story. there's a shortage of semiconductors there's also very high demand for various reasons. people are using less public transportation they have money because they haven't been able to spend and you know 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 short and of used cars in the united states, we should look at this as temporary and we very much think that it is and so do all the forecasters i've seen think that these price increases for used cars and new cars will -- they'll top out and then in all likelihood at some point in the future -- and we can't say exactly when -- they'll decline. >> and do you think, you know, rather than -- i appreciate that -- those recommendations

and what your actions are. is this a time when you see these p kinds of transitory inflations, a need for greater public or private investment >> well, i think there's a -- what investment does is it raises the potential growth rate of the country and makes workers more productive and companies more productive and countries more productive. and that raises living standards. and so more of it is generally better as long as it's well -- money well-invested, then it's -- then it's worth looking seriously at at any time. >> i agree and i would not call any of the things that we're trying to do irresponsible spending i think it -- 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 familiesment i want to pivot to another thing that i care very much about. this is credit rating agencies

last session in a bipartisan way i had the opportunity to work with chairwoman waters, representative barr to introduce the fed to treat all recognized statistically rated agencies uniformly so that more credit worthy companies could process the emergency lending -- i knew i would run out of time. i don't know if you would be able to speak to the nrsro's expansion. >> just briefly, yes at the very beginning of the crisis we had to get these facilities up and running and we just kind of worked with the big three. we then consistently expanded -- over and over again expanded the grouch agencys that we worked with we'll have to talk more about that offline if you like >> thank you so much thank you. i yield back >> thank you the gentleman from wisconsin, mr. steil, is now recognized for five minutes >> thank you, madam chairwoman

thank you mr. powell for being here today i want to stay on the topic of inflation. i'm a bit of a broken record on this issue because it's so important to families in wisconsin and across our country. the in fact the prospect of rising inflation, i brought this up in committee last july and last december. in those committees you suggest you're not ready to take action to head off inflation. and yesterday we received more data confirming the prices are continuing to rise and 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 cents, but families can see rapid price increases with their own eyes. i know it's not your role to comment on fiscal policy, but i'm very concerned with president biden's spending plans and its impact on inflation. last month increase in consumer prices at 5.4%, it was the largest jump that we've seen since august of 2008 right before the financial crisis.

over the past year, used cars have gone up 10% shoes are up 7%. we've seen increases in coffee, sugar, cotton, propane, all double digits. and higher material costs have added $36,000 to the price of a new home and i know you've responded to inflation concerns by saying price increases we're seeing are temporary and they'll subside as inflation markets return to normal after covid even if it's partially a case that inflation expectations may be changing and rising the prospects of a more persistent impact, in fact a poll conducted recently said that 87% of americans said they're concerned about inflation. on monday the new york fed reported consumers expected to see higher inflation over the medium term. can you comment on how the fed responds that consumers are

expecting more inflation >> we monitor -- we think inflation expectations are very, very important in a way, if businesses and households think that inflation should be 2%, then it probably will be 2% because they'll expect that and they'll demand that so, we monitor, you know, 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 and regular treasuries. so, we look at all of those things and i would say they all went down as a group at the beginning of the pandemic, which is not good and they've all moved back up as a group just about to the level i would say is consistent with -- in the range of consistent with our 2% inflation goal over time so, we watch this very carefully, and we would be very concerned if they were to move persistently and materially above 2% we would react to that >> let me build on this

discussion i want to just build in here to the distinction between transitory and persistent inflation and in particular as it impacts home prices according to the k shiller index, home prices have risen more than 14% over the past year, significant increase, and it's enough to put homeownership out of the reach of some americans. the fed is considering buying more than 40 billion in mortgage backed securities. here's my concern. inflation is temporary does the potential abatement of inflation reset housing prices and what are the impacts on homeowners and the impact on the fed and the s holdings >> so, housing prices, as i'm sure you know, don't go directly into inflation housing is an asset, and housing prices -- that's not a factor in inflation. what's a factor is rents and then in effect what the economists do is take the value of a home and impute a rental

cost to that and add it in it's just the way they do it so, you know, housing prices, they went up overall 15% last year that's too much. that's much higher than would be a normal level for housing prices i don't know what housing prices will do in the future, but there's just a lot of demand you know, there are -- people want to live -- as you know, they want to live in the suburbs now. they want to move out of the cities they want bigger houses. they've saved all this money because they couldn't travel and go to restaurants. there's a lot of demand. even if mortgage rates go up, as they ultimately will, then the question will be how much supply can be brought to the market that's out of our control. as you know, if you look around your district, it's a question of zoning, materials, labor, all those things >> if i could, if we zero into the material cost, you're seeing that about $36,000 increase in cost due to the material cost,

largely inflation -- look at lumber and other areas we'll continue this discussion offline as i'm out of time, and i will yield back. >> i'll be glad to do that >> thank you the gentlewoman from north carolina, ms. adams, is now recognized for five minutes. >> thank you, madam chair, and thank you, chairman powell, for being back with us like my colleagues, i want to touch on inflation you have described current inflationary as transitory and cited the bottlenecks and temporary factors like the high price of lumber as the reason why inflation has been high in recent months. and though this may be temporary, these bottlenecks have had real world consequences for example, my local housing partnership had to pause the construction of an affordable housing site because of a funding gap caused by the spike in lumber prices

and while lumber prices can be tied to the previous administration's actions, i know that many are still concerned about the rise in core prices. i'm hoping you can help us put some of these concerns to bed. will you tell us why you believe the recent inflation trends are temporary as the economy reopens and what are the factors playing into the upward pressure on prices >> i would be glad to try. as you know, all these industries kind of shut down a little more than a year ago on the expectation that we were looking at a really bad, difficult time and then sooner than expected, the economies reopened and demand for housing and demand for other things, cars, you name it, is really high because people saved they saved money with all the congressional fiscal support, more than 100% of income -- income lost was replaced so, really the consumer is in

very good shape to spend so, what's happening is there's a lot of demand. but on the supply side, it's just hard. they can't build enough houses there wasn't enough lumber you mentioned lumber prices. lumber prices went way up, but they've gone way down. they're still twice as high as they were before the pandemic came, but they're way off their high we don't know it but we think that will be the pattern for some of these things where they go very, very high and come down as supply and demand come together, as more supply comes online to meet the higher demand so, we have a very large but ultimately very flexible economy. it will adapt, we believe. it's not one of those economies that's rigid and has a lot of structural rigidities in it. it will adapt. and fairly quickly, just as it adapted to the pandemic, much more quickly and better frankly than people expected so, i think that all will happen and when that happens, we should see -- i won't say the prices will come back down, but the

level of inflation will return to more normal levels. >> even with the unemployment rates still elevated near 6%, the reports employers are offering higher wages and incentives to attract workers back to work in the work force and i've always said that working hard isn't enough if you don't make enough. so, chairman powell, what do you attribute the workers receiving incentives to reenter the work force and do the feds review these conditions as favorable even if the reasons for them are not? >> we're seeing this particularly in service industries where there are still lots and lots of job openings. and many people who used to work in service industries, relatively low-paid jobs we're seeing incentives to go back in. there clearly is a very, very high level of demand for people to come into these jobs. and for whatever reason, people are taking a little bit of time to look maybe for a better job and knowing that they're going

to go back -- these are people who were working in 2020 in february they want to work. these are people who want to work, right? but they may be taking a little bit of extra time in many cases to look for a job that pays better or that they like better or their preferences for working from home may have changed they might want to find a job where they can work from home. who knows? but in any case we're seeing difficulty in matching jobs and people up. there really isn't a precedent we can't look back and see the last time this happened. there is no last time this happened so we're kind of finding out as we go. but i really do think come back in six months. there will be a whole lot of these people back to work. and wages will have moved up a little bit for people at the low end and that's not a bad thing >> okay. great. thank you so much and thank you for joining us today madam chair, i yield back. >> thank you >> thank you very much the gentleman from south carolina, mr. timons is now

recognized for five minutes. >> thank you, madam chair, for holding this hearing and thank you chairman powell for being with us today. we've all seen the inflation numbers. some say it's only temporary but this was bound to happen coming out of the pandemic. and there may be truth to those arguments. but i think any economic observer recognizes usually with things like this there's not a single issue causing our trouble but rather converging factors. what is most frustrating you think to me is despite the real inflation we're experiencing, temporary or not -- and that is yet to be truly determined -- and it seems that while you, mr. chairman, are still firmly in the transitory camp, the federal open market committee minutes showed there is an increasing amount of disagreement from the board of governors on just how temporary it may be. and what is most frustrating to me about this entire episode is after all this stimulus congress has provided to the economy

since march of last year and how the greatest levels of inflation we've seen since the financial congress, this congress is considering spending several trillion dollars more and it most likely will nowhere 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 where one of your statutory mandates is inflation control, could you provide us an expectation of the type of inflation we should be prepared for if congress was to spend another 3 trillion in the next few months and let's say only 1 trillion of that would be paid for with an assortment of tax increases? >> no, i wouldn't be able really to provide you a real time the congressional budget office will be happy to make that forecast that's not something i can do on the spot >> i had a feeling that would be the answer but i think the answer to this question is obvious. high levels of inflation we're seeing would only increase and

stick around longer. we would certainly not have transitory inflation if we poured that amount of physical gas on the fire. i think the labor shortage we're seeing is a big piece of this puzzle but dozens and dozens of businesses 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, which results in higher inflation. in south carolina, we're returning to work at a drastically higher rate than the rest of the country. our unemployment claims are down 93% from the pandemic high last year, leading the country in this regard. a recent survey showed 1.8 million people have turned down work because of the overly generous unemployment benefits could this be avoided if congress removed disincentives to return to work such as the unemployment benefits that are in many states in place until september? >> well, i think we -- that's

already happened i mean, those will be expiring, right, in september. by the end of september, essentially all those benefits are gone in many states they're already gone, as you know, in south carolina we'll see that whatever effect those things are having now, it won't last much longer >> well, south carolina depends on businesses in other states, and when those states are not able to produce whatever a big supply to south carolina, 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 increated debt service cost to the federal government's $30 trillion plus guide. is that a factor you would take into consideration when deciding whether to potentially change the benchmark rate >> no, absolutely not. >> so, hundreds of billions of

dollars in increased cost to our debt services, none of that factor in that >> no. no i mean, first of all, market will anticipate that we are raising rates, so it's probably baked into something pretty significant. secondly, we borrow all across the curve. so, when we raise short term rates, it doesn't necessarily have a big effect on the government's borrowing cost. in any case, we are -- you know, we're here to achieve maximum employment, price stability, financial stability, supervise the banks, look after the payment system we're not in a position of considering -- and the united states doesn't have to be in a position where that kind of consideration gets into monetary policy, and it will not. >> the united states doesn't have to right now. so, i guess hope ffully we're always in that position. i have a couple question on cybersecurity. i will submit them for the

record thank you for that i yield back >> thank you very much the gentleman from massachusetts, mr. is recognized for five minutes >> thank you for being with us this afternoon many of my colleagues have asked terrific probing questions about inflation in the short term and effects on our economy and getting back to work i wanted to zoom out a little bit and ask about more long-term effects. one of the trends over the last at least 25 years has been the increasing returns to capital relative to the returns to labor. and there's been a lot of good theories about why that's happening to undermining workers' organizing power to increased automation and technology but it's clear that it would require sort of a discontinuous event to break that trend. and this pandemic seems like it could be we're seeing that businesses

that are striving to get people back into the labor force and back to work for offering higher wages, more flexibility, more benefits, quantitative and non-quantitative remediation do you think the covid-19 pandemic could be a discontinuous event that could change the balance of labor and capital and give a secular jolt to workers' bargaining power in the long term? >> i don't know. there are so many things that are possible and there will be things that cut in different directions. i mean, a lot of what we've 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 and a lot of that is just productivity is amplified by technology and knowledge and the ability to use it and by globalization too. so, there are a lot of factors that go into that. and the pandemic will do a number of things, but it will be hard to assess which way it will point. it's a good conversation to have >> i hear your point about increasing returns to education and technology certainly that's been evident in massachusetts in the life sciences and clean energy and cybersecurity spaces but there's also a huge port of the work force primarily service economy workers whose jobs are not automatable, they're not routine and they can't be automated. and even they have had downward pressure on their wages in the preceding decades. but now we're starting to see an uptick in what they can command in the labor market. do you think them in particular,

do you think they can have persistent wage increases over the next few years as they recover. >> so, i know the research you're refring to. that is very important research that shows exactly what you suggested. and if you saw people at the lower end getting paid more, i mean, it would be hard for anybody to be against that, right? and could we be seeing that? what we are seeing is entry level -- people going into jobs in the service sectors, which tend to be relatively low, low pay. we're seeing -- that's where we're seeing the pay increases it would be hard to say that's a bad thing. you know, in and of itself, right? you want want to see people getting paid well who are at the bottom of the income specter everyone was celebrating with wages going up for more in the bottom kquartile i don't know anybody who didn't

celebrate that >> how concerned should we be that let's put forward as a premise that we do see that wage inflation for the service economy. how concerned should we be that inflation for basic staples would eat up that increased purchasing power and be a net negative >> you know, it's hard to say. so, service companies, a lot of them do operate on a relatively modest margin. you have a tendency to pass those wage costs along over time so, these are hard questions to answer in the abstract part of what's happening, though, is there will be more automation in these jobs, and we're seeing that. a lot of these jobs -- we're going to find out how much those jobs can be done with automation because we've been hearing this for a year and a half. businesses are really looking hard at that now overtime that can make people more productive and their wages go up as a result. >> i appreciate your time,

chairman powell. i yield back my time is up. i believe i'm at the end >> thank you very much the gentleman from oklahoma, mr. lewis, is now recognized for five minutes >> thank you, chairwoman, and i appreciate that. chairman powell, it's been my observation that we're all the product of our experiences and the things that happen to us in our younger lives scar us forever. my grandparents were young men and women in the great depression in the 1930s in the dust bowl in the southwest scarred them for life. my grandparents until the day they died were afraid the great depression was coming back my parents were in the 1950s in a severe rain. to the day he died, my father was convinced this rain was the last rain. it would never rain again. i was a college student in the

'78 to '82 period when we had a inflation strike and when your predecessor decided to strangle inflation out of the system, he was really hard on me and a lot of great people across this country like my parents and gl grandparents, as i see this number in the consumer indexes, i'm nervous about this when i borrowed money in 1981, that made an impression on me. my question to you is i'm nervous. how much longer can we sustain numbers like this before you become nervous >> sorry, i had to unmute there. well, as i've said before, we do expect that we'll be able to see whether the narrative we're feeling turns out to be right. and i would say we would 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 sending us off on a period of high inflation, then we'll use our tools to guide inflation back down to 2%. in the end it's not going to be -- 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 in -- virtually all forecasters do believe 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 of the two things. and at a concern point the risks may flip but right now the risks to me are clear. >> i appreciate that, mr. chairman just understand, like my elders of two generations before, i

will sleep with one eye open until these numbers begin to come down. and if they do not, i realize, like your predecessors, you'll have to take the necessary action along that line, chairman, you made clear that the federal reserve expects the labor force participation to gradually improve. we're all optimistic and hopeful about that and the monetary policy report also highlights the maximum employment could look much different than it was prior to covid-19 can you discuss with us what you see is the potential long-lasting effects on the labor markets and how the fmoc will approach the question of what maximum employment should be moving forward in the new norm, whatever the new norm is in the post-covid world? >> sure. so, i would say that patience will characterize our approach on that. what we saw at the end of the last expansion was people staying in the labor market more than would have been predicted by the numbers so, labor force participation kept moving up, up, up

and we didn't -- to numbers that people didn't think we would see again, well above 63%. and sustained there for a couple of years that was an upside surprise. what we've seen since the pandemic is a wave of retirements. so -- and we won't really know the implications of that for some years but it could just be that that was a catchup for people who stayed in the labor market so, i guess the point is we can't really know what labor force participation is going to be and what the trend will be and what the right number is going to be. ultimately though you'll be able to tell with wages the real feature of our -- one of the features of our new framework is that, you know, we think if we don't see upward pressure on inflation and on wages then we're not going to say that the labor market's tight even if unemployment is really low and participation is high we won't see that. but if we do, then that will tell us maybe it is.

and we'll have to see where those numbers are. i think there's -- as i mentioned earlier, there's a degree of humility that forecasters need to have we have much to be humble about. so, this is another area where there's appropriate. >> thank you, chairman and thank you, chairwoman. and i yield back >> the gentlewoman from new york, ms. ocasio-cortez is now recognized for five minutes. >> thank you so much, madam chair. and thank you, chairman powell, for being with us today. as has been alluded to throughout this hearing, we have seen that supply bottlenecks and pandemic related factors have been one of the primary reasons that have led to price increases, whether it's computer chip complications with delaying the production of new vehicles, prompting a rush on used

vehicles, the price of lumber, shipping container logistics, et cetera, we know that these price increases were not caused by changes in interest rates. they were caused by supply chain complications. now, just to reiterate, you have said that these price increases are transition -- transitory, correct? >> yes we said we think they will be. of course we lack certainty on that, but we do believe that's the case >> thank you and if drivers of inflation are supply chain issues and potential areas of underinvestment, do you think that these issues are best resolved through investments making that supply chain more resilient? or higher interest rates >> you know, if we see things that are temporary or transitory and that should move through and go away because they're

associated with an event, the opening of the economy, then it would be appropriate for us to tighten policy, which really hasn't -- the point of which is to slow down the economic activity it would be inappropriate. it's a difficult decision to make >> thank you recently the bls reported the first three months of 2021 were the best quarter of wage growth. my concern, to be frank, is that a misplaced diagnosis playing out with inflation could cause the federal reserve to prematurely raise rates and constrain wage and employment gains that have been beneficial to millions of americans this means if wite do take that step back, millions of americans, ply marginalized communities will be left at a low wage the fomc is projecting multiple interest rate increases before the end of 2023 and before they

project achieving the pre-pandemic unemployment rate and at the june fomc meeting, the median fomc member's production on the longer run unemployment rate was about 4%, correct? >> yes, that's right >> now, yet before triggering the pandemic, the unemployment rate reached -- rather the uneme reached 3.5% without triggering inflation, orrect? >> that's right, yes >> and, in fact, in 2019, despite some pickup in wage growth, especially at the bottom, there didn't appear to be signs of the economy overheating. and, as you said in november of 2019, the benefits of long expansion are only now reaching many communities and that there's plenty of room to build on the impressive gains achieved so far so if, indeed, 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 and employment above the one that was experienced before the crisis. now do you believe this to be the case do you believe that the long-term -- longer run implies that 3.5% is too low, and do you think that we will be able to reach lower unemployment and higher labor force participation levels than the pre-pandemic ones >> i've every reason to think and do think we'll be able to get back to 3.5% unemployment. [ inaudible ] i'm quite sure we can get the high levels of participation >> okay. thank you. and to disaggregate this line between monetary and fiscal policy we saw that -- the world bank recently summarized estimates for 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. it's an enormous success and had a is gdp will be higher or after covid [ inaudible ] some of the fiscal policy interventions like the american rescue plan, stimulus checks, et cetera, played a role in that outcome? >> oh, yes, i think so the forecast of many is that we will be, by the middle of next year, above the prior trend. not the prior level but the prior growth trend, which is an incredible achievement and i attribute it to the c.a.r.e.s. act and fiscal policy that went so far so fast >> thank you very much >> thank you the gentle lady's time has expired. the gentleman from texas, mr. sessions, is now recognized for five minutes.

>> i'm not hearing mr. sessions. >> is that better? >> much. >> yes that's better. >> thank you thank you very much, madam chairman it's good to see you secretary, mr. chairman powell, thank you for joining us 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 and these banks reporting of their successes and the things that they see as perhaps things that are

inhibiting or causing you to think about your national plan around the country thank you. >> you'd like me to talk about that a little bit? >> yes, sir. >> okay. i'd be glad to so this is really one of the great features of our system we have 12 reserve banks around the country and they're in every community in the country, and they come back and extract a lot of data, a lot of information. not just businesses, it's universities and health centers and everything the story they're telling is like what we've been talking about today. you have very fast growth and a lot of money to spend on the part of people you have a lot of people in the labor market, people are quitting their jobs at incredibly high rates. typically that happens when labor markets are really tight this happens to be happening while there are a lot of unemployment people. we've never seen anything like this they bring back reports about that businesses have a hard time finding people people are looking for better

jobs they're taking a little bit more time to find the appropriate job. that's one thing there's also a lot of unevenness you still have sectors of the economy that are struggling to get back to where they were. a number of them are above where they were. housing, for example we're building more houses we had been building more houses than we had seen since the global financial crisis. people see price pressures broadly across the country, as we've discussed here today that comes back. if you look at our beige book, you'll see that broadly. it's in raw materials and to some extent in wages you'll see that as well. so it's all the things we've been talking about it would be hard to summarize it we really do get a very nuanced picture around different areas of the country, different sectors of the economy, which i think is a tremendous benefit to our policymaking process and also to the public i hope that's helpful.

>> so texas, that i represent, was the first city in texas to get back to its employment rate of pre-covid and it was done through a series of things. i think mostly because people really did not have an opportunity to have an underpinning of money that was coming in. they had to go to work we're not a big government town, where people get out and work. 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 think that -- i hope there's healthy debate that you not only encourage within your system but you also recognize there are a good number of republicans who believe that government propping up the system is inhibiting actually people taking jobs, giving 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 marketplace but the stability of america as we have known her and i appreciate you taking the 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're able to spot that in markets and actually give feedback to a state, the president, and certainly this committee on the facts and factors that seem to be successful i think that success that you've said today is getting us to a 2% inflation rate i don't have any problem with that at all. i could buy that but getting to necessarily us

because we want to say somebody wants a better job but we have record numbers of 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, madam chairman, i would yield back my time >> thank you very much the gentleman from new york, mr. torres, is now recognized for five minutes >> thank you, madam chairperson. thank you for being with us. i have a few questions for you based largely on a recent "new york times" op-ed and it points out that lower interest rates benefits those with assets rather than those savings 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 they support a strong labor market. and you saw this during the course of the last long extension, a very strong labor market and, you know, all of the people that we talk to -- we talked to many, many people out in the country who either live in or represent low and moderate income communities or both and they never come in and say, wow, you really should raise interest rates literally you never hear that from them. what we hear is they really like our policy they like our focus on maximum employment to say you want to focus on maximum unemployment in the direction of having a supported monetary policy. so that's really what i would say to that. wealth inequality is something that goes up, by the way, over the course of a business expansion because people who own homes and businesses and stocks and bonds and things like that as the economy is healthy for a period of ten years, they're going to benefit in their

wealth does anyone seriously argue 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? no of course we wouldn't do that. so i think we're doing the right thing with what we do. we're ultimately giving people a shot to get a good job and get a good wage and accumulate that wealth >> i'm going to quickly interject. in the same op-ed it is pointed out companies are taking out debt not to finance investments and infrastructure and workforce alone but rather to finance larger profits and stock buybacks what's your response to that argument >> you know, i think businesses make rational decisions generally about what they should invest in, when they should give money back to their shareholders, what that has to do with monetary policy is not clear to me. i see an economy that created 3.5% unemployment and wage gains fo