Federal Reserve Chairman Jerome Powell testifies earlier than the Senate Banking, Housing, and Urban Affairs Committee in Washington, D.C., June 22.
Photo:
Win McNamee/Getty Images
Everybody in Washington loves the Federal Reserve when the price of cash is zero. But when rates of interest are rising amid excessive inflation, affection is scarce, as Chairman
Jerome Powell
discovered earlier than the Senate Banking Committee on Wednesday.
Republicans gave him grief for letting inflation get uncontrolled, which is honest sufficient. “Clearly you are aware that you are going to be the person that takes the fall if inflation is not brought under control,” Sen.
Mike Rounds
(R., S.D.) instructed Mr. Powell, who promised to remain on the Fed’s new anti-inflation course.
But that resolve didn’t sit properly with Elizabeth Warren, who gave Mr. Powell a lecture on the politics of rising charges. “Will gas prices go down as a result of your interest rate increase?” she requested. “Will the Fed’s interest rate increases bring food prices down for families?”
Then she issued a warning. “You know what’s worse than high inflation and low unemployment? It’s high inflation and a recession with millions of people out of work. And I hope you’ll reconsider that before you drive this economy off a cliff,” Ms. Warren mentioned.
Translation: If there’s a recession after charges rise, Democrats aren’t about to take the autumn. They’ll blame the Fed. Ms. Warren opposed a second Fed time period for Mr. Powell, so her animosity isn’t stunning. But he can anticipate extra of this from extra Democrats if he does hold elevating charges, which he should do to interrupt inflation that was 8.6% during the last 12 months. A cynic would possibly ask if President Biden renominated Mr. Powell exactly to be the autumn man.
This is what occurs when the central financial institution makes an historic financial mistake and permits the best inflation price in 40 years. The check of a Fed Chairman isn’t when charges are falling. It’s when charges are rising, and unemployment rises too. That’s when Americans will discover out if Mr. Powell has the starch for the job.
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Appeared within the June 23, 2022, print version.
