President Biden met with Jerome H. Powell, the Federal Reserve chair, on the White House on Tuesday, as a part of an effort to each sell Americans on a brightening view of the economy and reassure consumers that leaders in Washington are hard at work to slow rapidly rising prices.
White House officials forged the visit as a likelihood for Mr. Biden, who nominated Mr. Powell for a second term as Fed chair late last yr, to congratulate him on his recent Senate confirmation. It was also the beginning of a monthlong try and persuade the general public that inflation is coming under control and that the economy is performing much better than Mr. Biden’s polling numbers would suggest.
Chatting with reporters firstly of the meeting, which also included Treasury Secretary Janet L. Yellen, a former Fed chair, Mr. Biden reiterated that fighting inflation was his top economic priority and that he wouldn’t interfere with the Fed because it tried to tame rising prices.
That fight, Mr. Biden said, “starts with a straightforward proposition: Respect the Fed, respect the Fed’s independence, which I even have done and can proceed to do.”
The president added that Mr. Powell “and other members of the Fed have noted at this moment they’ve been laser focused on addressing inflation like I’m.”
The Fed has begun raising rates of interest to decelerate the economy, hoping that reining in consumer demand will eventually help bring price increases under control.
Understand Inflation and How It Impacts You
But while the central bank may help cool down the economy to a more sustainable path over time, the Fed’s moves are more likely to hurt within the near term: Rate increases are making it dearer for households and businesses to borrow money to fund big purchases, they usually work to counteract inflation partly by slowing down hiring and wage growth.
Mr. Biden’s push to slow inflation, with the Fed leading the charge, puts Mr. Powell in a potentially awkward position. The president has repeatedly said that he respects the Fed’s independence to set monetary policy and that he won’t cajole the central bank to vary rates of interest, as his predecessor, former President Donald J. Trump, loved to do. But Mr. Biden has also made clear that he expects the Fed to tame inflation without plunging the economy right into a recession, a mix that might be difficult for Mr. Powell to tug off.
Inflation in america is running near its fastest pace in 4 many years, with prices rising for gas, food and rent. While price pressures have shown early signs of abating, it’s unclear how large and sustainable that decline can be, given kinks in global supply chains and Russia’s war in Ukraine.
Americans have develop into pessimistic concerning the economy and their very own financial prospects as their paychecks have didn’t sustain with inflation. The squeeze hitting consumers comes at a troublesome time for the White House and Democrats, because the November midterm elections approach and voters cite inflation and the fee of living as top economic concerns.
Mr. Biden has consistently struck a way more optimistic tone than the broader public on the economy, stressing month after month of rapid job growth — and an ensuing drop within the unemployment rate — because the country recovers from the pandemic recession.
After greater than a yr of watching inflation rise faster than his economic advisers projected, the president in recent weeks has attempted to convey more urgency along with his comments on inflation, promising to do all the things in his power to slow rising costs.
Top economic officials within the administration fanned out across cable news programs and the White House briefing room on Tuesday to hammer the message that job growth has rebounded strongly and that the economy is transitioning to a more stable growth rate — and to lower inflation.
Mr. Biden “understands that at once the highest issue on people’s minds is prices — prices on the gas station, prices on the food market,” Brian Deese, who heads the White House National Economic Council, told reporters on Tuesday. “And he’s made very clear, and he’s communicating very clearly, that that’s his top economic priority and that we are able to address this from a position of strength.”
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What’s inflation? Inflation is a loss of buying power over time, meaning your dollar won’t go as far tomorrow because it did today. It is often expressed because the annual change in prices for on a regular basis goods and services akin to food, furniture, apparel, transportation and toys.
What causes inflation? It could possibly be the results of rising consumer demand. But inflation can even rise and fall based on developments which have little to do with economic conditions, akin to limited oil production and provide chain problems.
Is inflation bad? It is determined by the circumstances. Fast price increases spell trouble, but moderate price gains can result in higher wages and job growth.
Can inflation affect the stock market? Rapid inflation typically spells trouble for stocks. Financial assets normally have historically fared badly during inflation booms, while tangible assets like houses have held their value higher.
Mr. Biden stressed those points in a Wall Street Journal opinion piece published online Monday evening, by which he stressed wealth gains for typical Americans on his watch and said america was “in a greater economic position than almost some other country.” He promised to fight inflation by reducing the federal budget deficit, working to repair broken global supply chains, passing laws to scale back energy costs for families and counting on the Fed.
“With the best policies,” he wrote, “the U.S. can transition from recovery to stable, regular growth and produce down inflation without giving up all these historic gains.”
Ms. Yellen acknowledged after the meeting on Tuesday that she had been incorrect to downplay inflation, noting that the economy faced unexpected shocks and provide chain problems that boosted food and energy prices.
“Well, look, I feel I used to be incorrect then concerning the path that inflation would take,” Ms. Yellen told CNN.
While Mr. Biden has announced some measures aimed toward reducing costs — and Mr. Deese and other aides have called on Congress to do more to assist in the hassle — the president has made clear that he’s counting on the Fed to assist tame inflation.
Rapid price increases are also an issue globally, as beleaguered shipping routes and factory shutdowns in China keep some goods briefly supply and because the war in Ukraine pushes up fuel and food costs. The European Central Bank is predicted to start raising rates of interest this summer, and the Bank of England, Reserve Bank of Australia and Bank of Canada are amongst a gaggle of other monetary policy authorities which have already begun raising their borrowing costs.
With central banks all over the world pulling back economic support, the war in Ukraine stoking uncertainty and China locking down cities to try to maintain the coronavirus from spreading, risks to the worldwide economy are significant.
On the Fed’s meeting this month, “various” policymaking officials “noted downside risks to the outlook, including risks related to the Russian invasion and Covid-related lockdowns in China and the likelihood of a chronic rise in energy and commodity prices,” minutes of the gathering, which were released last week, showed.