Jerome H. Powell, the Federal Reserve chair, said in an interview on Thursday that lowering inflation is likely to be painful but that allowing price gains to persist would be the bigger problem — squaring off with the major challenge facing his central bank as he officially starts his second term at its helm.Mr. Powell, whom Senators confirmed to a second four-year term at the head of the central bank in an 80-19 vote on Thursday, holds one of most consequential jobs in the United States and the world economy at a moment of rapid inflation and deep uncertainty.Consumer prices climbed 8.3 percent in April from the previous year, according to data reported on Wednesday. And while inflation eased slightly on an annual basis, it remained near the fastest pace in 40 years, and the details of the release suggested that price pressures continue to run hot.The Fed has already begun raising interest rates to try and cool the economy, making its largest increase since 2000 when it lifted borrowing costs by half a percentage point this month. Mr. Powell and his colleagues have signaled that they will continue to push rates higher as they try to restrain spending and hiring, hoping to bring demand and supply into balance and drive inflation lower.Mr. Powell suggested Thursday in an interview with Marketplace that an even bigger 0.75 percentage point interest rate increase, though not under consideration at the moment, could be appropriate if economic data come in worse than officials expect.“The process of getting inflation down to 2 percent will also include some pain, but ultimately the most painful thing would be if we were to fail to deal with it and inflation were to get entrenched in the economy at high levels,” Mr. Powell also said. “That’s just people losing the value of their paycheck to high inflation and, ultimately, we’d have to go through a much deeper downturn.”Mr. Powell, who was chosen as a Fed governor by former President Barack Obama and then elevated to chair by former President Donald J. Trump, was renominated by President Biden late last year.Understand Inflation and How It Impacts You
Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Inflation Calculator: How you experience inflation can vary greatly depending on your spending habits. Answer these seven questions to estimate your personal inflation rate.Interest Rates: As it seeks to curb inflation, the Federal Reserve began raising interest rates for the first time since 2018. Here is what the increases mean for consumers.State Intervention: As inflation stays high, lawmakers across the country are turning to tax cuts to ease the pain, but the measures could make things worse.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.Though he has been popular among lawmakers for much of his tenure, several Republicans and Democrats voted against the nomination. Senator Robert Menendez, Democrat from New Jersey, cited the central bank’s failure to promote Latino leaders. Senator Richard Shelby, Republican of Alabama, cited high inflation in opposing Mr. Powell, posting on Twitter that “we should not reward failure.”Inflation is likely to be the defining challenge of Mr. Powell’s second term. As Mr. Shelby’s comments suggest, the Fed has been criticized for responding too slowly to rapid price gains last year. Mr. Powell has emphasized that policymakers did the best they could with the data in hand.“If you had perfect hindsight, you’d go back and it probably would have been better for us to have raised rates a little sooner,” Mr. Powell said in his interview with Marketplace. “I’m not sure how much difference it would have made, but we have to make decisions in real time, based on what we know then, and we did the best we could.”With Mr. Powell’s confirmation, Mr. Biden has now appointed four of the Fed’s seven governors in Washington, putting his imprimatur on the central bank at a crucial moment.The Senate last month confirmed Lael Brainard, formerly a Fed governor, as Mr. Biden’s choice for the Fed’s vice chair, an influential position within the central bank.This week, the Senate confirmed two other new Fed governors — Lisa D. Cook and Philip N. Jefferson. Mr. Biden has also nominated Michael S. Barr as the new vice chair for supervision, and his confirmation hearing before the Senate Banking Committee is scheduled for next week.Ms. Brainard and Mr. Powell have long been aligned on policy, and the Fed’s newest governors — Ms. Cook and Mr. Jefferson — indicated during their confirmation hearings that they, too, are focused on fighting inflation. Fed officials view stable prices as a crucial building block forBy: Jeanna Smialek and Emily Cochrane
Title: Fed Chair Says Bringing Inflation Down Will Take ‘Some Pain’
Sourced From: www.nytimes.com/2022/05/12/business/jerome-powell-confirmed.html
Published Date: Thu, 12 May 2022 22:13:41 +0000
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