US President Joe Biden meets with Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen, not pictured, in the Oval Office of the White House on March 31. May 2022 in Washington.Evan Vucci/The Associated Press
US President Joe Biden met with Federal Reserve Chairman Jerome Powell on Tuesday to discuss the historic inflation that is draining American wallets, even as he assured the central bank chief that he would be free. of political interference.
“The president emphasized to Chairman Powell in the meeting what he has consistently emphasized, even today: that he respects the independence of the Federal Reserve,” White House National Economic Council Director Brian Deese said after the meeting, calling it “very constructive”.
Deese also nodded to the “transition” ahead for the US economy, as the Fed raises interest rates to more normal levels to curb demand and ease price pressures, slowing growth. in the process.
“We have run this first leg of the race at a very fast pace which has put us in a strong position relative to our peers, but this is a marathon and we have to move and shift to stable and resilient growth,” said Deese. “In fact, we can deal with inflation without having to sacrifice … all those (labor market) gains.”
Biden’s dealings with Powell contrast sharply with former President Donald Trump’s approach, which involved routinely criticizing Powell over Fed interest rate decisions and even threatening to fire him.
The meeting, the first between the two men since Powell’s confirmation for a second term by the Senate earlier this month, comes as rising prices for gasoline, food and consumer goods have led to inflation to 40-year highs.
In brief remarks before the meeting, Biden said he would meet with Powell and US Treasury Secretary Janet Yellen to “discuss my top priority, and that is tackling inflation.”
Wall Street stock indices closed lower
NO TIME FOR NUANCES
The US economy had its strongest growth in nearly four decades in 2021, after the government poured trillions of dollars into COVID-19 relief into the economy and the Federal Reserve kept borrowing costs near zero. . The rescue efforts helped reduce unemployment to 3.6% from a pandemic-era high of 15%, but also accelerated consumer spending, which contributed to rising prices.
A Labor Department report earlier this month showed jobless rolls shrunk to the lowest level in 52 years, helping fuel wage growth.
The Fed expects inflation to moderate on its own, as businesses work out supply chain problems complicated by the pandemic, for example, and consumers shift spending toward services.
But Powell has also made it clear that the Fed is no longer counting on that and will raise interest rates as much as necessary.
He sees high inflation as the number one economic risk facing the country, and bringing it under control as the Fed’s top priority during its second term, even if the process is painful for households and businesses, and raises the unemployment rate a bit. .
The Fed has already raised interest rates by 3/4 of a percentage point this year. Most Fed policymakers say they expect to keep raising rates until they hit around 2.5% by the end of this year, and higher if needed. The planned rate hikes will include a half percentage point hike at the June and July meetings.
For Biden and the Democratic Party that could mean a difficult midterm election season, in which they are trying to maintain control of the Senate and the House of Representatives. Biden plans a media blitz in June to convince Americans that the economy is strong.
US consumer price growth slowed in April as gasoline prices fell from record highs, suggesting inflation has likely peaked, though it is likely to remain high for a while. for a while and keep the Fed’s foot on the brakes to cool demand.
Powell said earlier this month that despite some encouraging signs that price pressures may be peaking, the current environment is “not a time for wildly nuanced inflation readings,” and officials at the The US central bank will continue to tighten policy until inflation comes down “convincingly”. road.”