President Biden is scheduled to meet later today with Fed Chairman Jerome Powell, who was formally sworn in last week for a second term as head of the U.S. central bank.
The rare meeting at the Oval Office will focus on inflation and the state of the economy, as prices continue to soar on everything from gasoline and food to transportation and housing. While the Fed has embarked on a cycle of aggressive rate hikes and trimming its massive balance sheet, many have criticized the central bank for being too slow in addressing the price pressures, while others say moving too severely could trigger a recession (or that the U.S. economy is already in one).
Snapshot: On Friday, data from the Commerce Department showed that personal consumption expenditures, the Fed’s favorite inflation gauge, rose 6.3% in April from a year earlier. While that was a deceleration from the 6.6% pace seen in the previous month, it’s still more than three times the central bank’s inflation target of 2%. Meanwhile, the more closely-watched inflation gauge, the consumer price index, inched down to 8.3% in April (from 8.5% in March), but is still at its highest level since the early 1980s.
A Memorial Day op-ed from President Biden flagged the current high-priced environment, calling it America’s “top economic challenge right now.” In the article, he described that the “Federal Reserve has a primary responsibility to control inflation” and outlined the importance of the institution’s independence, but laid out a three-part plan of things that can be done on the fiscal and executive side. Will it work?
The strategy: 1) “The price at the pump is elevated in large part because Russian oil, gas and refining capacity are off the market. We can’t let up on our global effort to punish Mr. Putin for what he’s done, and we must mitigate these effects for American consumers. That is why I led the largest release from global oil reserves in history. Congress could help right away by passing clean energy tax credits and investments that I have proposed.”
2) “We can also reduce the cost of everyday goods by fixing broken supply chains, improving infrastructure, and cracking down on the exorbitant fees that foreign ocean freight companies charge to move products. My Housing Supply Action Plan will make housing more affordable by building more than a million more units, closing the housing shortfall in the next five years. We can reduce the price of prescription drugs by giving Medicare the power to negotiate with pharmaceutical companies and capping the cost of insulin. And we can lower the cost of child and elder care to help parents get back to work.”
3) “We need to keep reducing the federal deficit, which will help ease price pressures. Last week the nonpartisan Congressional Budget Office projected that the deficit will fall by $1.7T this year – the largest reduction in history. My plan would [also] reduce the deficit even more by making common-sense reforms to the tax code. The Internal Revenue Service should have the resources to collect taxes that Americans already owe. We should level the international taxation playing field so companies no longer have an incentive to shift jobs and profits overseas.”