Powell, Brainard Hearing could highlight the risks of rising prices, many Fed controversy Writer Reuters


© Reuters. PHOTOGRAPHS: Federal Reserve Chairman Jerome Powell speaking with Fed Governor Lael Brainard (L) at Federal Reserve Bank of Chicago, Chicago, Illinois, US, June 4, 2019. REUTERS / Ann Saphir / File Photo


Author Howard Schneider

WASHINGTON (Reuters) – U.S. Senate committee will hold talks this week with Federal Reserve Chairman Jerome Powell and vice-chairman Lael Brainard which could provide a wealth of ideas for the US central bank to tighten monetary policy, as well as spark controversy. which is to come. weeks of his work on addressing various issues such as climate change and racial inequality.

Powell appears before the Senate Banking Committee Tuesday to discuss his second four-year term as Fed chief executive; Brainard, who is now the Fed’s governor, will be asked by the same party Thursday to be promoted to four years as second to second Fed. These responsibilities need to be approved by the entire Senate, which is chaired by President Joe Biden’s Democrats, with the committee hearing first session.

These activities are among the two most important in the US and global economy, and at the top of the summit will be Fed plans to raise interest rates and reduce $ 8 trillion in bonds to curb rising inflation. target of large bank 2%.

The issue has been politically sensitive for Biden, with rising prices slashing the wage earnings of many workers, Republicans cited as money from Biden’s expense, and the acceptance by Democrats as evidence that the economic recovery is not going well.

The Fed in December announced that it wanted to tighten its grip more quickly than expected, with rising prices perhaps as early as March. But it was still unclear how quickly Omicron’s coronavirus could spread, and listening this week is the first opportunity for Powell and Brainard to say how the spread of the disease and the disruption of schools and businesses has helped them. appearance.

Economists, if any, have tended to be hawkish, and in recent days have been increasingly speculating that the Fed will move faster and faster to reduce inflation that is not showing itself. The Consumer Price Index is expected to rise by about 7% in December since last year, according to a Reuters economist survey, a level that has not been seen since the sharp threats of the 1970s and early 1980s. Data will be released Wednesday.

“The Fed’s instability and inflation outweigh any concerns about the Omicron-type risks,” Oxford Economics economists Nancy Vanden Houten and Kathy Bostjancic wrote recently.

The financial markets are well positioned the Fed which is set to be aggressive in response to lower inflation.

Mortgage markets are rising sharply due to rising interest rates, yields on Treasury securities are rising and bond bonds are deteriorating sharply in the first week of 2022. Risk assets like stocks and even crypto currencies – a new financial group with less experience in meeting the Fed. tightening the ring – also noseded in the first days of the year.


Biden’s idea of ​​appointing two Washington veterans and the Fed to work at the top of the central bank was part of a vote of no confidence and resilience at a time when the US was returning to the epidemic – not enough in many ways but frustrated by rising, disruptive prices. the sale of goods, as well as the pressure and suspicion of workers to work.

Powell, a Republican, and Brainard, a Democrat, and well-known Capitol Hill activists who abstained from voting in the Senate, worked together with the Fed’s main response to the coronavirus crisis, and recently agreed on a plan to withdraw from the program. inflation is growing.

But the election also shows a change. Brainard has been speaking as the Fed’s governor over the need for a central bank to address and address the problem of climate change that could affect financial institutions, financial systems and other financial institutions – ideas related to Biden and their potential. a strong position to represent as a second to the chair.

Other Fed nominations by Biden, in addition to the vice-presidential post of directors, are expected to reinforce the need for central banking and other issues such as the impact of economic inequality, and possibly the emergence of a majority of Fed women in the history of the central bank.

Republicans can look into questions from Brainard about how they view the weather; Powell could face tough questions from Democrats, most notably Senator Elizabeth Warren, who has already announced her intention to challenge her election on what she sees as the smallest way to run big banks.

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