WASHINGTON (AP) – President Joe Biden will meet Fed Chairman Jerome Powell as inflation soars Out of the American wallet and the president’s public approval.
Tuesday’s meeting was the first since Biden nominated Powell to lead the Fed, and it comes just weeks after the Senate confirmed Powell to a second term. It also represents a sort of reversal for Biden as inflation has morphed into a threat. The president claimed in April 2021 that he was “very particular about not talking to an independent Fed” and wanted to avoid being seen as “telling them what to do and what not to do.”
The White House initially described the inflation spike as a temporary side effect of supply chain problems as the U.S. emerges from the pandemic. Republican lawmakers were quick to criticize Biden’s $1.9 trillion coronavirus relief package from last year, saying it injected too much money into the economy and led to more inflation. The narrative also has implications for some leading economists, who see fiscal support as excessive, even as it helps the job market recover.
With energy and food costs soaring after Russian President Vladimir Putin ordered the invasion of Ukraine in February, Biden now faces a growing number of global challenges. Meanwhile, China imposed lockdown measures related to the coronavirus outbreak, further straining supply chains. That puts the European Union at risk of record inflation and a recession, while U.S. consumers are increasingly dissatisfied with the average gasoline price of $4.62 a gallon.
The White House said the president and Powell will discuss the state of the U.S. and global economy. Their common goal is to move the U.S. from a strong rebound and high inflation to low inflation and stable growth.
“The most important thing we can do right now is to lower inflation,” Biden said in an op-ed published Monday in The Wall Street Journal. Tackling inflation is my top economic priority.”
Consumer prices were 8.3% higher than a year ago, about four times the Fed’s target.Powell acknowledged that the Fed has limited tools to deal with supply shocks, and one of the main uncertainties is whether the Fed can reduce inflation without causing a U.S. recession
There is also little the administration can do to curb inflation, which could leave Biden’s political fortunes at the mercy of global markets. The president has twice ordered the release of oil from the U.S. strategic stockpile, but has only seen a short-term and moderate impact on natural gas prices. He also worked to help ports clear containers faster.
The administration has also proposed stronger enforcement of antitrust and other laws in hopes of lowering prices for consumers, while arguing that reducing the federal deficit would also help. However, Biden’s domestic agenda faces an unclear path in Congress.
Powell pledged to keep raising the Fed’s key short-term interest rate to cool the economy until inflation “falls in a clear and convincing manner.” Those rate hikes have raised concerns that the Fed, as it slows borrowing and spending, could push the economy into a recession. Despite the market rally last week, that concern has caused shares to fall sharply over the past two months.
Powell has already hinted that the Fed may raise its benchmark interest rate by half a percentage point in June and July — double the usual rate hike.
In his op-ed, Biden said the record pace of job creation in the wake of the pandemic will slow sharply, suggesting a rise in monthly jobs from 500,000 to 150,000. “This will show that we are successfully entering the next phase of the recovery – because this job growth is consistent with low unemployment and a healthy economy,” he said.
Biden pledged not to interfere in Fed decision-making ahead of the meeting, but said he and Powell were aligned on tackling inflation.
“My predecessors disparaged the Fed, and past presidents have tried to inappropriately influence Fed decisions during rising inflation,” Biden wrote. “I will not do that. I have appointed high-quality people from both sides to lead. The agency. I agree with their assessment that fighting inflation is the biggest economic challenge we face right now.”