the federal reserve has finally thrown in the towel the central bank on wednesday admitted us inflation is likely to “exceed 2 for some time” for most of the year chairman jerome powell and other senior fed officials insisted a big spike in inflation was largely “transitory” and would fade to 2 or less by the end of 2021 only in the past few months have they changed their tune as inflation mounted the yearly pace of inflation for instance surged to 44 in the 12 months as of september and touched a 30year high using the fed’s preferred pce price gauge and the consumer price index increase has risen a sharper 54 over the past year inflation is eating into worker wage gains raising the cost of living and could even threaten the us economic recovery households are paying more for food gas rent and new cars to cite a few notable examples before the pandemic consumer prices had been rising a scant 15 to 2 a year powell and the fed still insist the surge in inflation largely reflects “factors that are expected to be transitory” such as shortages of labor and business supplies yet they also stressed they can’t say precisely when price pressures will fade powell on wednesday even suggested the word “transitory” has confused wall street djia  he said transitory merely means the surge in inflation won’t become permanent or leave longlasting scars on the economy still the fed chairman acknowledged the spike in inflation has understandably made people worried especially those on lower incomes who are getting hurt the most by rising prices “the level of inflation we have right now is not consistent with price stability” he said the fed wants inflation to average about 2 a year while he stressed it’s too soon to raise interest rates the normal response to higher inflation he insisted the fed will “use our tools as necessary” to keep price pressures in check the first step the fed is taking is to phase out its massive 120 billion bondbuying program which was adopted early in the pandemic to keep interest rates low and support the economy the central bank will start to taper purchases by 15 billion a month starting in midnovember read fed to end massive stimulus strategy for the economy powell said the end of bond purchases will give the fed more flexibility to combat high inflation if it persists the increase in inflation is widely attributed to shortages of labor and supplies that emerged after the full reopening of the economy earlier in the year demand for a broad range of goods and services soared and businesses were unable to keep up in no small part because of bottlenecks in global supply chains that disrupted the flow of goods around the world massive stimulus spending from congress in washington also fueled the surge in consumer demand powell said he expects the supply bottlenecks to relent by next spring or summer and ease the upward pressure on inflation though he cautioned “the timing of that is high uncertain” they point out that price increases have spread beyond a narrow range of categories in the spring to encompass a broader range of goods and services what’s more the cost of labor is also surging and feeding into higher inflation “the developments related to inflation over the past few months have been troubling” said chief economist stephen stanley of amherst pierpont securities