President Biden has re-nominated Jerome Powell to head the Federal Reserve, and CEI Senior Fellow Ryan Young expressed hope that Powell will make the politically tough decisions needed to get inflation back under control.
Statement by CEI Senior Fellow Ryan Young:
“Getting inflation back under control is a top priority. Jerome Powell’s renomination sends a needed message of stability. President Biden did not nominate a yes-man who will do as he’s told, though some of Biden’s other nominees may yet fill that role. Under the circumstances, this news is about as good as could be expected.
“Inflation is what happens when too much currency is chasing too few goods and services. Record government spending deficits are adding to inflation and will be made worse by the infrastructure and reconciliation bills. If Chairman Powell raises interest rates to tighten the money supply, which he should, those debts will become more expensive for the government to repay. But this will raise the ire of the White House and Capitol Hill. Making matters worse, politicians also generally favor looser monetary policy heading into an election. The Fed’s independence is always under attack, and the stakes are especially high during the COVID economic crisis.
“Fighting inflation also means removing trade, labor, and energy regulations that are clogging supply networks and preventing goods and services from being created in the first place. Chairman Powell has nothing to do with those policies, but he is still tasked with fighting their inflationary effects. He is not being set up for success, but President Biden could have done far worse.”