President Biden met with Jerome H. Powell, the chairman of the Federal Reserve, at the White House on Tuesday, as part of an effort to both sell Americans an enlightening view of the economy and reassure consumers that leaders in Washington are working hard. are at work to slow down rapidly rising prices.
White House officials saw the visit as an opportunity for Mr. Biden, who nominated Mr. Powell for a second term as Fed chairman late last year, to congratulate him on his recent confirmation in the Senate. It was also the start of a month-long effort to convince the public that inflation is under control and that the economy is doing much better than Mr Biden’s polls suggest.
Addressing reporters at the start of the meeting, including Treasury Secretary Janet L. Yellen, a former Fed chairman, Mr. Biden reiterated that fighting inflation was his top economic priority and that he would not interfere. with the Fed in its efforts to tame rising prices.
That battle, Mr Biden said, “starts with a simple proposition: respect the Fed, respect the independence of the Fed, which I have done and will continue to do.”
The president added that Mr. Powell “and other members of the Fed have noted that they are laser focused on tackling inflation like I am right now.”
The Fed has begun raising interest rates to slow the economy in the hopes that curbing consumer demand will eventually help control price increases.
Understanding inflation and how it affects you
But while the central bank may help the economy cool down to a more sustainable path over time, the Fed’s actions are likely to hurt in the near term: Rate hikes make it more expensive for households and businesses to borrow money to fund large purchases, and they work to curb inflation, in part by slowing hiring and wage growth.
Mr. Biden’s pressure to slow inflation, with the Fed leading the way, puts Mr. Powell in a potentially tricky position. The president has repeatedly said that he respects the independence of the Fed to set monetary policy and that he will not persuade the central bank to change interest rates, as his predecessor, former President Donald J. Trump, liked to do. But Mr Biden has also made it clear that he expects the Fed to contain inflation without sending the economy into recession, a combination that could be difficult for Mr Powell to achieve.
Inflation in the United States is approaching its fastest pace in four decades, with gas, food and rent prices rising. While price pressures have shown early signs of abating, it’s unclear how big and sustainable that drop will be, given the kinks in global supply chains and Russia’s war in Ukraine.
Americans have become pessimistic about the economy and their own financial prospects because their salaries have not kept up with inflation. The consumer squeeze comes at a difficult time for the White House and Democrats as the November midterm elections approach and voters cite inflation and the cost of living as top economic concerns.
Biden has consistently taken a much more optimistic tone than the wider public about the economy, focusing month after month on rapid job growth – and a consequent drop in the unemployment rate – as the country recovers from the pandemic recession.
After more than a year of seeing inflation rise faster than his economic advisers had predicted, in recent weeks the president has tried to convey more urgency with his comments on inflation, pledging to do everything possible to mitigate rising costs. to slow down.
Top economic officials in the administration spread across cable news programs and the White House briefing room on Tuesday to hammer out the message that job growth has recovered strongly and that the economy is moving towards a more stable growth rate — and lower inflation.
Mr Biden “understands that the most important issue on people’s minds right now is prices — gas station prices, supermarket prices,” Brian Deese, head of the White House’s National Economic Council, told reporters on Tuesday. . “And he has made it very clear, and he communicates very clearly, that that is his top economic priority and that we can tackle this from a strong position.”
Frequently asked questions about inflation
What is inflation? Inflation is a loss of purchasing power over time, meaning your dollar won’t go as far tomorrow as it did today. It is usually expressed as the annual price change for everyday goods and services such as food, furniture, clothing, transportation, and toys.
Mr Biden emphasized those points in a Wall Street Journal op-ed published online Monday night, in which he emphasized capital gains for typical Americans on his watch and said the United States is “in a better economic position than almost any other country.” “. He pledged to fight inflation by cutting the federal budget deficit, working to repair broken global supply chains, passing legislation to lower household energy costs and relying on the Fed.
“With the right policies,” he wrote, “the US can move from recovery to stable, steady growth and drive down inflation without giving up all these historic gains.”
After Tuesday’s meeting, Ms Yellen acknowledged that she had been wrong in downplaying inflation, noting that the economy faced unexpected shocks and supply chain problems that pushed food and energy prices up.
“Well, look, I think I was wrong then about the path inflation would take,” Ms. Yellen told CNN.
While Mr. Biden has announced some measures to cut costs — and Mr. Deese and other aides have called on Congress to do more to aid the effort — the president has made it clear that he is counting on the Fed to keep inflation at bay. restrain.
Rapid price increases are also a problem worldwide, as besieged shipping lanes and factory closures in China leave some goods in short supply and the war in Ukraine drives up fuel and food costs. The European Central Bank is expected to start raising interest rates this summer, and the Bank of England, Reserve Bank of Australia and Bank of Canada are among a group of other monetary policy authorities that have already started raising their borrowing costs.
As central banks around the world withdraw economic support, the war in Ukraine fuels uncertainty and China shuts down cities to try to prevent the coronavirus from spreading, the risks to the global economy are significant.
At the Fed’s meeting this month, “several” policymakers noted “downside risks to the outlook, including risks related to the Russian invasion and Covid-related lockdowns in China and the likelihood of a prolonged increase in energy and commodity prices” , minutes emerged from the meeting, which were released last week.
