(Washington) US Central Bank President Jerome Powell will promise in the Senate on Tuesday to do everything he can during his second term “to prevent inflation from taking hold” in the United States.
President Joe Biden announced on November 22 that he had reappointed him for a second four-year term but he has yet to receive confirmation from the Senate.
Mr Powell is credited with taking the swift and sweeping action necessary to keep the economy afloat during the historic recession caused by the COVID-19 pandemic, so his confirmation is not in jeopardy.
But Americans’ heightened frustration with soaring prices is likely to push Congress to grill the Federal Reserve (Fed) boss – a Republican who had been appointed by former President Donald Trump – on how the Fed intends to do it to contain inflation.
“We will use our tools to support the economy and a strong labor market and to prevent inflation from taking root,” he said, according to a speech prepared in advance and released on Monday, without further details. .
Consumer prices in the United States rose in November at a rate not seen in nearly 40 years, to 6.8% last month compared to November 2020.
Data for December will be released on Wednesday.
Jerome Powell will express his support for the poorest households hard hit by this price hike which affects essential products such as food, housing and transport.
“We are strongly determined to achieve our statutory objectives of maximum employment and price stability”, he will also declare.
For “Jay” Powell, however, the way forward is perilous because the main tool is to raise interest rates.
However, if the Federal Reserve (Fed) increases them too quickly, the economy could weaken and even sink into recession, dashing hopes of the “maximum employment” objective.
Acting too slowly to contain price spikes could lead to even higher inflation.
Either scenario would also be a nightmare for Democrats under President Joe Biden in a midterm election year.
And in any case, a rate hike will not have an immediate effect.
Jerome Powell should also be questioned by Senator Elizabeth Warren on the stock market activity of Fed officials.
A series of revelations on important transactions carried out by several of them, including Jerome Powell, although legal but during the economic crisis linked to COVID-19, shocked public opinion in the fall.
This led to the resignation of the regional chairmen of the Boston Fed, Eric Rosengren, and Dallas, Robert Kaplan. And leads to new internal rules.
Senator Elizabeth Warren, Democrat of Massachusetts, asked the Fed in a letter sent on Monday to release more information on the operations.