"I want to be clear that my administration understands that if we were to ever experience unchecked inflation over the long term, that would pose a real challenge to our economy," Biden said. "So, while we're confident that is what we're seeing today, we're going to remain vigilant about any response that is needed, as I made clear to Chairman Powell of the Federal Reserve. When we met recently, I told him the Fed is independent to take whatever steps it deems necessary to support a strong, durable, economic recovery. Whatever different views some might have on current price increases, we should be united."
The US economy grew by an annualized rate of 6.4 percent in the first quarter of 2021, after a 3.5 percent contraction for all of 2020 due to shutdowns and other disruptions caused by the coronavirus pandemic measures. The Federal Reserve envisions a 6.5 percent expansion for all of this year, although some officials at the central bank have more ambitious expectations, forecasting growth of up to 7.0 percent.
However, inflation has increased with the prices of almost everything soared from the lows of the coronavirus pandemic.
The Personal Consumption Expenditure Index, the Federal Reserve’s preferred gauge for inflation - rose by a multiyear high of 3.4 percent in the 12 months to May when stripped of volatile food and energy prices.
The US Consumer Price Index, a more popular inflation gauge used worldwide, grew by 5.4 percent over a one-year period in June for its largest increase in 13 years, the Labor Department announced on Tuesday.
The Federal Reserve has acknowledged the inflationary pressures arising from bottlenecks in US supply chains struggling to cope with demand.
However, the Federal Reserve has insisted the inflationary pressures are "transient" and will fade as the economy makes a full recovery. The central bank has said US interest rates, which it has held at between zero and a quarter percentage point since the outbreak of the pandemic in March 2020, will probably not be hiked until 2023.