WASHINGTON — President Joe Biden is set to meet with Federal Reserve Chairman Jerome Powell as soaring inflation takes a bite out of Americans’ pocketbooks and the president’s public approval.
Tuesday’s meeting is the first since Biden renominated Powell to lead the central bank and comes weeks after his confirmation for a second term by the Senate. It also represents something of a reversal by Biden as inflation has evolved as a threat. The president asserted in April 2021 that he was “very fastidious about not talking” with the independent Fed and wanted to avoid being seen as “telling them what they should and shouldn’t do.”
The White House initially portrayed the inflation surge as a temporary side effect caused by supply chain issues as the U.S. emerged from the pandemic. Republican lawmakers were fast to criticize Biden’s $1.9 trillion coronavirus relief package from last year as pumping too much money into the economy and causing more inflation. That narrative also has held some sway with leading economists who say the financial support was excessive even though it helped the job market roar back.
Biden now faces an increasingly global challenge as energy and food costs jumped after Russian President Vladimir Putin ordered the invasion of Ukraine in February. Simultaneously, China imposed lockdowns tied to coronavirus outbreaks that further strained supply chains. This has left the European Union nursing record inflation and the risks of a recession, while U.S. consumers are increasingly disgruntled by gasoline prices averaging a nominal record of $4.62 a gallon.
The White House said the president and Powell would discuss the state of the U.S. and global economies. Their shared goal is to move the U.S. from its robust rebound and high inflation to low inflation and steady growth.
“The most important thing we can do now to transition from rapid recovery to stable, steady growth is to bring inflation down,” Biden said in an op-ed posted Monday by The Wall Street Journal. “That is why I have made tackling inflation my top economic priority.”
Consumer prices are 8.3% higher than a year ago, about four times the Fed’s target. Powell has acknowledged the U.S. central bank has limited tools to respond to supply shocks, and one of the major uncertainties is whether the Fed can bring inflation down without causing a recession in the U.S.
The administration also has few means for curbing inflation, possibly putting Biden’s political fortunes at the mercy of global markets. The president has twice ordered the release of oil from the U.S. strategic reserve, only to see a short-term and muted impact on gas prices. He’s also launched efforts to help ports clear shipping containers faster.
The administration has also proposed greater enforcement of antitrust and other laws in hopes of reducing prices for consumers, while arguing that federal deficit reduction would also help. Yet Biden’s domestic agenda faces an unclear path in Congress.
Powell has pledged to keep ratcheting up the Fed’s key short-term interest rate to cool the economy until inflation is “coming down in a clear and convincing way.” Those rate hikes have spurred fears that the Fed, in its drive to slow borrowing and spending, may push the economy into recession. That concern has caused sharp drops in stock prices in the past two months, though markets rallied last week.
Powell has signaled that the Fed will likely raise its benchmark rate by a half-point in both June and July — twice the size of the usual rate increase.
Biden, in his op-ed, indicated that the record-setting pace of job creation in the aftermath of the pandemic would slow dramatically, suggesting more moderate levels of 150,000 jobs per month from 500,000. He said, “It will be a sign that we are successfully moving into the next phase of recovery—as this kind of job growth is consistent with a low unemployment rate and a healthy economy.”
Ahead of the meeting Biden pledged not to interfere in the Fed’s decision-making, but suggested that he and Powell are aligned on addressing inflation.
“My predecessor demeaned the Fed, and past presidents have sought to influence its decisions inappropriately during periods of elevated inflation,” Biden wrote. “I won’t do this. I have appointed highly qualified people from both parties to lead that institution. I agree with their assessment that fighting inflation is our top economic challenge right now.”