Federal Reserve Chairman Jerome Powell has thrown cold water on President Biden’s hopes that inflation will prevail in the midterm elections.
Mr. Powell issued a candid message. The Fed is determined to fight inflation by raising interest rates more sharply, which will likely bring pain to Americans in the form of a weakened economy and job losses.
“These are the unfortunate costs of keeping inflation under control,” Mr. Powell said Friday in a high-profile speech at the Fed’s annual economic symposium in Jackson Hole, Wyoming. “But failure to restore price stability would mean far greater pain.”
Stocks plunged Friday on Powell’s sober message, with all three major indexes down more than 3%.
Inflation hit a 41-year high of 9.1% in June, but there are signs that it is easing slightly. A Commerce Department report on Friday, which the Fed is watching, said consumer prices in July rose 6.3% year-on-year, after posting a 6.8% annualized rise in June, the highest since 1982. was the largest increase.
Biden said the report “confirms that our economic plan is building the economy from the bottom up and middle out and moving forward.”
Biden said, referring to the Democratic Party’s $740 billion tax and spending bill, “Americans are starting to get some relief from inflation, and the anti-inflation bill I signed last month will help keep prices down.” Stated. That he signed the law this month.
But Powell said Fed officials were determined to keep inflation under control by further raising the central bank’s benchmark interest rate. It suggests that it aims to raise it from 3.75% to 4%, but not high enough to hurt the economy, in hopes of slowing growth long enough to overcome high inflation. .
After raising key short-term rates by three-quarters of a percentage point at the last two meetings (part of the Fed’s fastest string of rate hikes since the early 1980s), Powell said the Fed could slow its pace. “At some point.” This suggests that such a slowdown is not imminent.
Runaway price increases are plaguing the economy for most Americans, even though the unemployment rate has fallen to a half-century low of 3.5%. Republicans also posed political risks to Biden and Congressional Democrats in this fall’s election, including accusing the president’s $1.9 trillion fiscal aid package approved last year of fueling inflation.
Critics say the Inflation Reduction Act will have no effect on inflation, and Friday’s consumer price figures are not very encouraging.
Alfredo Ortiz, President and CEO of Job Creators Network, said: “To finally end this persistently high inflation, the Biden administration and congressional Democrats must commit to ending their reckless spending.”
Texas Rep. Kevin Brady, the top Republican on the House Ways and Means Committee, said the latest inflation report still showed signs that the economy was contracting.
“This is a recession, families can no longer afford the costs, and energy prices will fall,” Brady said. “While the White House bizarrely boasts of ‘zero inflation,’ the raging ‘Biden inflation’ has led to five straight quarters of declining family wages. That’s before taking into account the disastrous effects of the bill” and student inflation: a loan pardon that drives prices even higher.
“While the future looks bleak for working families waiting to be audited by the 710,000 new IRS, paying off student debt for a tiny fraction of eligible wealthy Americans is a big deal. We are forced to,” Brady said. “Republican tax reform has boosted middle class salaries and outpaced inflation. No wonder President Biden continues to repeat the uncovered lies about it.”
Biden acknowledged that the administration still has work to do to ease the financial burden on families.
“We have to help families who have been squeezed paycheck to paycheck for decades,” he said. We are building an economy from the out and have confirmed that we are moving forward.”
— Part of this article is based on communications service reports.