Earlier this month, the Fed started to taper its asset purchase program at a $15 billion per-month pace. This would bring the purchases to an end in June.

Fed watchers think the Fed might double to pace of tapering so that the purchases end in March, though there were concerns that the Fed would delay tapering because of the omicron variant. Powell said the Fed would learn more about the new variant over the next two weeks before its Dec. 14-15 interest-rate policy meeting.

“The tone of his remarks was notably hawkish,” said Krishna Guha, vice chairman of Evercore ISI, in a note to clients.

“The Fed’s primary focus is on the risk of persistent excess inflation, which omicron might aggravate, and not downside risks to activity from the variant,” Guha added.

Powell was more stern about his views on inflation.

“I do think the threat of persistently higher inflation has grown,” the Fed chairman said.

Asked about his repeated assertion earlier this year that higher inflation would be “transitory,” Powell said “it’s probably a good time to retire that word.” High inflation won’t subside until the second half of 2022, he said.

Powell tied stable prices to the desire to return the labor market to its pre-pandemic strength.

“To get such a healthy job market, we’re going to need a long expansion and to get that, the economy needs to have stable prices, he said.

Powell vowed the Fed would use its tools so that inflation is not entrenched.

Stocks
DJIA,
-1.76%

SPX,
-1.62%
opened lower and sank further after Powell’s comments. The yield on the 10-year Treasury note
TMUBMUSD10Y,
1.456%
moved higher.