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Federal Reserve Chair Jerome Powell. (Screenshot via C-SPAN)

Jerome Powell, the new Federal Reserve Chairman, believes Amazon may be one cause of slow U.S. inflation.

In his first appearance before the Senate Banking Committee, Powell fielded a question about why inflation rates have remained low since the Great Recession.

“It’s a global phenomenon,” he said. “We don’t perfectly understand it but I would say since the crisis, a big factor that has been weighing down inflation is just the weakness in the economy. You’ve had a lot of slack and the economy has not been tight so it makes sense that that would press downward on inflation. We also had the strong dollar and lower oil prices in ’14 and ’15 … There are other stories though. There’s the Amazon effect story. There’s global slack, the idea that slack around the word is affecting the tightness of the U.S. labor market. Really hard to tie those down from an empirical standpoint, but they may be having some sort of an effect on inflation as well.”

Cyber Monday 2016 at Amazon Fulfillment Center in Dupont WA. (GeekWire Photo / Kevin Lisota)

The “Amazon effect” refers to the decline in traditional retail employment despite expansion in the overall retail sector. That paradox is occurring because of the explosion of online retail, driven in part by Amazon. As online shopping becomes more efficient and widely-used, fewer traditional retail workers are needed. The Amazon theory purports that lower demand for retail labor keeps wages low and holds down the price of consumer goods. But economists are split on the extent to which this phenomenon actually impacts inflation.

Powell’s Amazon comments were first reported by CNBC.

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