Biden to meet Fed Chairman as inflation bites US wallets | National Policy

By ZEKE MILLER and JOSH BOAK – Associated Press

WASHINGTON (AP) — President Joe Biden is expected to meet with Federal Reserve Chairman Jerome Powell as runaway inflation takes a hit on the wallets of Americans and the President’s public approval.

Tuesday’s meeting is the first since Biden reappointed Powell as head of the central bank and comes weeks after he was confirmed for a second term by the Senate. It also represents something of a reversal from Biden as inflation has become a threat. The president claimed in April 2021 that he was “very picky not to talk” with the independent Fed and wanted to avoid being seen as “telling them what they should and shouldn’t do”.

The White House initially described the surge in inflation as a temporary side effect caused by supply chain issues as the United States emerged from the pandemic. Republican lawmakers were quick to criticize Biden’s $1.9 trillion coronavirus relief package from last year as pumping too much money into the economy and causing more inflation. This narrative has also had some influence on leading economists who say the financial support was excessive even as it helped the labor market rebound.

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Biden now faces an increasingly global challenge as energy and food costs surged after Russian President Vladimir Putin ordered an invasion of Ukraine in February. Simultaneously, China imposed lockdowns related to coronavirus outbreaks which further strained supply chains. That left the European Union’s record inflation and the risks of a recession, while U.S. consumers are growing unhappy with gasoline prices averaging a nominal record high of $4.62 a gallon. .

The White House said the president and Powell would discuss the state of the US and global economies. Their common goal is to move the United States from its strong rebound and high inflation to low inflation and steady growth.

“The most important thing we can do now to move from a rapid recovery to steady, steady growth is to bring inflation down,” Biden said in an op-ed published Monday by The Wall Street Journal. “That’s why I’ve made fighting inflation my top economic priority.”

Consumer prices are 8.3% higher than a year ago, about four times the Fed’s target. Powell acknowledged that the US central bank has limited tools to respond to supply shocks, and one of the key uncertainties is whether the Fed can reduce inflation without causing a US recession.

The administration also has little leverage to rein in inflation, perhaps putting Biden’s political fortunes at the mercy of global markets. The president twice ordered the release of oil from the US strategic reserve, only to see a short-term and moderate impact on gas prices. He has also launched efforts to help ports clear shipping containers faster.

The administration has also proposed greater enforcement of antitrust and other laws in hopes of lowering prices for consumers, while arguing that cutting the federal deficit would also help. Still, Biden’s domestic agenda faces an unclear path in Congress.

Powell pledged to keep raising the Fed’s short-term interest rate to cool the economy until inflation “falls clearly and convincingly.” These rate hikes raised fears that the Fed, in its drive to slow borrowing and spending, could push the economy into recession. This concern has caused stock prices to fall sharply over the past two months, although markets rallied last week.

Powell signaled that the Fed would likely raise its benchmark rate by half a point in June and July, twice the size of the usual rate increase.

Biden, in his op-ed, indicated that the record pace of job creation in the aftermath of the pandemic would slow significantly, suggesting more moderate levels of 150,000 jobs per month instead of 500,000. He said: “It will be a a sign that we are successfully entering the next phase of recovery, as this type of job growth is compatible with low unemployment and a healthy economy.”

Ahead of the meeting, Biden pledged not to interfere in Fed decision-making, but suggested he and Powell be aligned on fighting inflation.

“My predecessor debased the Fed, and past presidents sought to influence its decisions inappropriately during times of high inflation,” Biden wrote. “I will not do that. I have appointed highly qualified people from both parties to lead this institution. I agree with their assessment that tackling inflation is our main economic challenge right now.”

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