U.S. Federal Reserve Chair Jerome Powell said supply bottlenecks have been longer lasting than anticipated, and he expects inflation pressures to remain high in coming months before easing.

“These effects have been larger and longer lasting than anticipated, but they will abate, and as they do, inflation is expected to drop back toward our longer-run 2 per cent goal,” Powell said in testimony to the Senate Banking Committee released Monday. “As reopening continues, bottlenecks, hiring difficulties, and other constraints could again prove to be greater and more enduring than anticipated, posing upside risks to inflation.”

At the same time, Powell said, labor-market gains slowed last month especially in sectors sensitive to the pandemic. The 5.2 per cent unemployment rate understates the shortfall in employment as indicated by the fact that the labor force participation rate hasn’t picked up, he added.

U.S. central bankers last week left their benchmark interest rate unchanged in a range of 0 per cent to 0.25 per cent and said tapering its US$120 billion in monthly asset purchases “may soon be warranted” if the economy continues to progress toward their goals. 

In a press conference following the meeting, Powell said the inflation test for scaling back the bond buying has been met, while the employment test “is all but met.”

He didn’t discuss tapering asset purchases in his prepared remarks.