Powell reiterated his recent view that goods inflation has fallen as supply-chain troubles have eased and the sharp rise in rent should soften in the next year.
But he said price increases for services, excluding housing -- which accounts for more than half of underlying consumer spending -- have shown little sign of easing. Those costs are fueled mostly by worker wage increases.
“Although nominal wage gains have slowed somewhat in recent months, they remain above what is consistent with 2% inflation and current trends in productivity. Strong wage growth is good for workers but only if it is not eroded by inflation.”
But several committee Democrats told Powell the benefits of higher rates aren't worth the cost. Sen. Elizabeth Warren, D-Mass., said inflation chiefly has been caused by supply troubles, the war in Ukraine and corporate greed, rather than a surge in consumer and business demand that the Fed can dampen with higher borrowing costs.
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