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Fed Chair Jerome Powell will acknowledge the impact that surging inflation has had on ordinary Americans during his confirmation hearing before the Senate Banking Committee on Tuesday morning.
Powell, who was renominated for a second four-year term as the central bank’s chair, will tell lawmakers the Fed is prepared to take necessary action to address inflation. Americans are contending with a surge in prices for everyday goods like groceries and gas.
In prepared remarks released ahead of the hearing, Powell notes the US economy’s rapid resurgence during the COVID-19 pandemic has contributed to “persistent supply and demand imbalances and bottlenecks, and thus to elevated inflation.”
“We know that high inflation exacts a toll, particularly for those less able to meet the higher costs of essentials like food, housing, and transportation,” Powell’s prepared testimony says. “We are strongly committed to achieving our statutory goals of maximum employment and price stability.”
“We will use our tools to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched,” he adds.
Powell is expected to face a grilling from Senate lawmakers just one day before officials release December data for the consumer price index, a key gauge for inflation. The index is expected to show an annual increase of 7.1 percent for December data, the sharpest spike in roughly four decades.
Originally nominated by former President Donald Trump, Powell played a key role in shaping the country’s economic response to COVID-19. President Biden renominated Powell in November.
In December, minutes from the Fed’s December FOMC meeting indicated officials will raise interest rates faster than expected in the coming months due to a tight labor market and rising inflation. The Fed is set to dial back unprecedented measures meant to prop up the US economy during the pandemic.
“We can begin to see that the post-pandemic economy is likely to be different in some respects. The pursuit of our goals will need to take these differences into account,” Powell’s testimony says.
The Senate Banking Committee includes Sen. Elizabeth Warren (D-Mass.), a vocal critic of Powell’s leadership at the central bank. Warren has vowed to oppose Powell’s confirmation as multiple Fed officials face scrutiny over trading activity during the pandemic.
This week, Fed vice chair Richard Clarida said he would resign from the board effective Friday, months after relevations that he made trades valued between $1 million and $5 million in February 2020 just before a shift in Fed policy.
Powell did not directly address the ethics concerns in his prepared testimony, though he does affirm a pledge to maintain “integrity” at the central bank.
“We know our decisions matter to every person, family, business, and community across the country,” Powell says. “I am committed to making those decisions with objectivity, integrity, and impartiality, based on the best available evidence, and in the long-standing tradition of monetary policy independence.”
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