Biden to reiterate Fed’s ‘independence’ during Powell meeting

The White House is in need of solutions to quell the highest inflation in 40 years and soaring petrol and food prices.

United States President Joe Biden will meet with Federal Reserve Chair Jerome Powell on Tuesday to stress the need to cool the highest inflation in 40 years and rein in soaring petrol, food and consumer goods prices.

The meeting will be the first since the Fed chair was confirmed for his second term by the Senate earlier this month.

Biden will also reiterate the Fed’s independence in addressing the inflation crisis, White House economic adviser Brian Deese said in television interview with MSNBC news on Tuesday.

“We are in this transition from what has been a historic economic recovery – historic in the jobs created, historic in the wealth created for American families – and now we need to transition to more stable and resilient growth,” he told MSNBC news.

Also joining the president and central bank chief is US Treasury Secretary Janet Yellen, who served as Fed chair between 2014 to 2018.

Discussions will focus on the unique standing of the US economy, which experienced its strongest growth in nearly four decades in 2021.

The government poured trillions of dollars in economic stimulus into the economy last year in an effort to jolt the nation out of a COVID-19 induced recession.

Now the White House is faced with runaway food and energy prices, which are top concerns for voters heading to the polling stations for November’s midterms. The Democratic Party is hoping to maintain control of the Senate and House of Representatives.

In a Wall Street Journal opinion piece published on Monday, Biden said the Federal Reserve has a “primary responsibility to control inflation”.

Biden also wrote that his “predecessor demeaned the Fed, and past presidents have sought to influence its decisions inappropriately during periods of elevated inflation. I won’t do this.”

Where the Fed stands now

The Federal Reserve has already raised interest rates by three-quarters of a percentage point this year and plans to raise rates by half a percentage point more at each of its next two meetings.

The central bank has also left the door open for potentially more increases to come after that.

The Fed had previously expressed hope that inflation will in part level out on its own as companies sort out supply chain issues and consumers shift spending towards services.

While US consumer price growth did slow in April as petrol prices eased off record highs, Powell has made it clear that the Fed is no longer just counting on that.

Earlier this month, the Fed chief said that despite some encouraging economic signs that point to price pressures easing, it is “not a time for tremendously nuanced readings of inflation”.

The Powell-led Fed has been criticised by some economists for being slow to address high inflation by ending emergency support for the economy.