WASHINGTON: President Joe Biden held a rare White House meeting with the head of the Federal Reserve (Fed), Jerome Powell, yesterday to discuss soaring inflation and White House attempts to tame the politically damaging price surge ahead of midterm elections.
“I am meeting to discuss my top priority: that is addressing inflation in order to transition from historic recovery to a steady growth,” Biden said.
Also joined in the Oval Office by Treasury Secretary Janet Yellen, Biden stressed to reporters that while the Fed has a “laser focus” on inflation, he does not intend to infringe on the central bank’s traditional independence.
“It starts with a simple proposition: respect the Fed, respect the Fed’s independence,” he said.
After the meeting, White House National Economic Council director Brian Deese, calling it “very constructive”, said: “The president underscored to Chair Powell in the meeting what he has underscored consistently including today – that he respects the independence of the Federal Reserve.”
Deese also nodded to the “transition” ahead for the US economy as the Fed lifts interest rates to more normal levels to dampen demand and ease price pressures, slowing growth in the process.
“We have run this first leg of the race at a very rapid clip that has put us in the strong position relative to our peers, but this is a marathon and we have to move and shift to stable resilient growth,“ he said. “We can actually take on inflation without having to sacrifice ... all of those (labour market) gains.”
Inflation of more than 8% is casting a heavy shadow on Biden’s claims to be steering the US economy to health after the Covid-19-induced crash.
Employment is back near pre-pandemic levels and growth is strong, but savage price increases for essentials including food and fuel are driving growing public dissatisfaction.
The Fed has raised rates three quarters of a percentage point, kicking off what central bank officials say could be a series of increases aimed at calming down the economy, although there are fears that the unintended result may be recession.
Federal Reserve governor Christopher Waller said on Monday that he backs several more half-point rate increases – “until I see inflation coming down closer to our 2% target”.
According to a poll in mid-May by Pew Research Center, inflation is easily the biggest topic of concern for Americans, with 70% making it number one, compared with 54% listing violent crime.
Separately, Yellen said yesterday that she was wrong in the past about the path inflation would take, but said taming price increases is Biden’s top priority and he supports the Fed’s actions to achieve that.
Asked in a CNN interview whether she was wrong to downplay the threat that inflation posed in public statements over the past year, Yellen said: “I think I was wrong then about the path that inflation would take.”
“As I mentioned, there have been unanticipated and large shocks to the economy that have boosted energy and food prices and supply bottlenecks that have affected our economy badly that I didn’t at the time fully understand,“ she added. – AFP, Reuters
