Inflation Sticker Shock to be on Powell Says President

6/2/2022

Economy

0 min read

Powell is Told by President that He is the Face of Inflation

President Biden made clear on Tuesday (June 1) that Federal Reserve Board Chairman Jerome Powell is the person responsible for handling the inflation fight. Inflation had hit a 40-year high this year while GDP retreated, yet jobs remain strong. The Fed’s new quantitative tightening and Fed Funds increases run the risk of spurring a recession. The President’s message seems to have been Powell’s in charge of the outcome. The rare meeting between a Fed Open Market Committee (FOMC) chairman and a sitting President would seem to highlight the importance of allowing the nation to understand there’s a separation of powers when it comes to the economy. Biden openly told Powell prior to the closed-door meeting that addressing inflation was his “top priority” and added that his plan “starts with a simple proposition: respect the Fed.” This places Powell in the national spotlight as being the face of whatever comes next.

Biden’s top White House economic adviser, Brian Deese, held a press briefing after the meeting related to the Fed’s mission to reel in price spikes. A reporter asked Deese if he thought the Fed has moved too slowly on inflation. The response takes responsibility away from the White House; Deese said, “what the President is doing is acknowledging and underscoring the pivotal role that the Fed plays institutionally and that monetary policy plays in the process of bringing prices down.”

This is the second effort this week to calm discussions about what has been unfolding economically. The President published an op-ed in the Wall Street Journal on Tuesday. The op-ed discussed inflation as well as the $2 trillion Build Back Better initiative, which stalled in Congress because of its expected impact on inflation, lowering the high cost of shipping, renewable energy subsidies, a social spending initiative, raising taxes, and deficit reduction. Biden also wrote that “the Federal Reserve has a primary responsibility to control inflation” the 46^th President then spoke of his efforts, including releasing oil from the national strategic reserve to lower gas prices.

The annual US inflation rate declined slightly to 8.3% in April after hitting a 40-year annual high of 8.5% in March, according to the CPI report released by the Bureau of Labor Statistics. Meanwhile, a poll released last month by CBS found that 69% of US adults disapprove of Biden’s handling of inflation. Separating oneself in the public’s eye from an economy that is fraught with the kind of risk that voters dislike, or even marrying oneself to strong economies, is what Presidents have done through the years.

Does the intent to show separation suggest the Administration fears there may be a hard landing? Lower inflation and sustainable growth can be considered building back better. The economic pain to get there, timed with the mid-term elections, may be the biggest concern addressed this week.

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Paul Hoffman

Managing Editor, Channelchek

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