WASHINGTON: US Federal Reserve Chair Jerome Powell said on Tuesday that the central bank will not raise interest rates preemptively based on inflation fears, reiterating recent inflation surge is transitory.

"We will not raise interest rates preemptively because we think employment is too high, because we fear the possible onset of inflation. Instead, we will wait for actual evidence of actual inflation or other imbalances," Powell told lawmakers at a hearing before the House Select Subcommittee on the Coronavirus Crisis,  Xinhua reported. Powell said a substantial part of the recent rise in inflation comes from categories that are directly affected by the reopening of the economy, such as used cars and trucks in particular.

Core personal consumption expenditures price index, the Fed's preferred inflation measure, is expected to rise to 3 per cent by end of 2021, and then decelerate to 2.1 per cent over the next two years, according to the Fed's latest economic projections released last week. "Of course we are prepared to use our tools as appropriate if that turns out not to be the case, you know, to guide inflation to 2 percent," Powell said.

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