Fed's Powell Says Long-Term Inflation Expectations Well-Anchored

• Fed's tools (interest rates) primarily impact demand, not supply, making direct responses to supply shocks like rising oil prices less effective in the short term.
• Monetary policy typically 'looks through' temporary supply shocks, as policy lags mean effects would materialize after the shock has passed.
• A key concern is preventing a series of supply shocks from de-anchoring inflation expectations, but current longer-term expectations appear well-anchored.

Federal Reserve Chair Jerome Powell discussed the Fed's approach to rising oil prices, distinguishing between demand and supply shocks. He highlighted that the Fed's tools primarily influence demand and that for supply shocks, the policy tends to 'look through' them due to long and variable lags. A critical focus is on carefully monitoring inflation expectations, which he noted appear to be well-anchored beyond the short term.