Federal Reserve Chairman Jerome Powell issued a stern warning to lawmakers who are debating whether he should be re-elected.
The warning says rising prices are a danger to the employment market, and he pledged to get them within control.
Democrats will not be happy with this report
That position might contrast starkly with certain Democrat senators. Democrats have encouraged the Fed to keep its two-year stimulus program going until the economy’s benefits are seen by the majority of employees.
Powell, a Republican appointed for a second term by President Biden, is likely to receive easy approval. However, the prospective fight over the Fed’s intentions to tighten monetary and fiscal policy might be a foreshadowing of future conflicts with Democrats.
Democrats would like to keep the labor market’s healthy growth; even some conservatives believe the central bank has been too slow to rein in inflation.
As costs increase, unemployment falls, and coronavirus endures with record-breaking amounts of new infections, the Fed (which pumped trillions of dollars into the market to stimulate lending and expenditure) is already beginning to withdraw its support.
What is next? Transient hyperinflation? https://t.co/VPKpoX6Fbi
— InvestockReal (@InvestockR) January 13, 2022
During his confirmation process, Powell went into detail with members of the Senate Banking Committee about how the reserve bank will cut inflation without stifling a promising labor market rebound or roiling financial markets.
Powell made it clear the Fed is concerned about excessive inflation. The central bank altered its focus under his tenure to guarantee many employees a potential advantage from growth in the economy.
To do this, the Fed committed to delaying hiking rates until inflation occurred, so hiring and wage growth would not be slowed.
However, rising inflation is now on the way; the Fed chairman warns this poses a risk to employees as well.
“If inflation becomes too chronic, if these elevated concentrations of inflation get established in our industry and in people’s minds, then we will inevitably have to raise rates,” he said.
“It might also result in a recession, which would be harmful to workers. So, in order to achieve maximum employment, which we define as ongoing progress in employment and involvement, price stability will be required.”
“High inflation poses a serious threat to achieving maximum employment,” he continued.
It took 2 years, 200,000 drug overdoses, an average American weight gain of 20 pounds of fat, and hyper inflation for the CDC to admit that FROM and WITH Covid should be tracked differently.
— Cernovich (@Cernovich) January 9, 2022
Administration shortfalls are responsible for this inflation
The Fed believes manufacturing and shipping delays (which were common during the pandemic, due to plant closures and staff shortages) are contributing to inflation.
Powell said he still anticipates the challenges to go away, but it’s uncertain how quickly that may happen, which might lead to higher inflation for a longer period of time.
He also said a high appetite for products is also driving up inflation, which the Fed will try to temper with interest rate hikes.
However, Powell expressed optimism that supply will increase as well, resulting in a more balanced dynamic in which supply and demand are once again in sync.
“I don’t believe we should attempt to accomplish all of the demand and supply adjustments through the demand channel,” he remarked.