President Biden used a rare meeting with Federal Reserve Chair Jerome Powell to declare that he’s respecting the central bank’s independence — while simultaneously shifting responsibility for taming decades-high inflation ahead of the November midterms.
Biden seized on the Oval Office session to argue that while fighting price increases is his top priority, that work was primarily the purview of the Federal Reserve.
“My plan is to address inflation. That starts with a simple proposition: respect the Fed, respect the Fed’s independence, which I have done and will continue to do,” Biden said.
President Joe Biden and Jerome Powell in November 2021.
It’s Biden’s third in-person session with Powell since taking office, and recalls the stakes when Ronald Reagan met with then-Fed chief Paul Volcker almost four decades ago as he sought reelection amid galloping price pressure.
Biden has been attempting to show he’s maximizing efforts to curb the hottest inflation in 40 years heading into November midterms, in which Democrats’ risk losing their slim congressional majorities. The White House has increasingly sought to shift the burden for battling prices to the Fed in public comments, as polls show rising costs are voters’ top concern. In an op-ed published Monday in The Wall Street Journal, Biden said the Fed has “a primary responsibility to control inflation.”
Biden said Tuesday that his his role as president is to give the Fed “the space they need to do their job, adding, “I’m not going to interfere with their critically important work.”
Modern presidents, with the exception of Donald Trump, have made a point of publicly declaring their commitment to Fed independence and kept any criticism or advice private.
Trump broke with that tradition, regularly criticizing the central bank, arguing it should have been more aggressive in cutting interest rates, and at one point saying he was considering demoting Powell. Biden sought to draw a contrast with Trump, writing in the op-ed 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.
”The president’s message to the Fed in Tuesday’s meeting was that he “plans to stay out of their way,” Cecilia Rouse, chair of the Council of Economic Advisers, told Bloomberg Television.
“The president wants to say, go forth and do what you need to do,” Rouse said.
Biden renominated Powell for a second four-year term at the Fed’s helm, restoring the tradition of keeping the chair that he inherited from the previous administration in place. Powell was confirmed by the Senate earlier this month and was sworn into office last week.
Even so, White House economic advisor Brian Deese defended Tuesday’s meeting, saying it was “standard practice for presidents and chairs of the Federal Reserve to meet from time to time to share views on the economy.”
Biden planned to use his session to stress that he’s giving the central bank “space to operate” independently to address the inflation crisis, Deese, who attended the meeting along with Treasury Secretary and former Fed Chair Janet Yellen, said in an interview with Bloomberg Television earlier Tuesday.
The central bank answers to Congress, which has given it a dual mandate to pursue price stability and maximum employment, though presidents do get to select the Fed’s seven governors including the chair and two vice chairs. As a result, White House officials usually try to avoid commenting on monetary policy.
Trump flatly ignored past practice and regularly castigated Powell for raising interest rates, calling him “clueless” and asking if he was a “bigger enemy” than Chinese President Xi Jinping. At one point Trump even consulted advisors on whether he could fire Powell, who he’d promoted to chair. Powell stood his ground, publicly confirming that he would not resign if asked to by the president but otherwise declining to comment on the barrage of often belittling criticism.
Powell, who has been criticized for being too slow in confronting inflation, also calls it his top priority and has launched the most aggressive tightening campaigns in decades.
Data released Friday showed the central bank’s preferred gauge of price pressures, the personal consumption expenditures price index, rose by 6.3% last month from April 2021 — more than three times the Fed’s 2% target.
Officials raised interest rates by a half-percentage point earlier this month and Powell signaled they plan to follow up with increases of the same size in June and July, even as they start shrinking their massive balance sheet.
Financial markets have swung sharply as investors fret the Fed could trigger a recession in its efforts to tame prices. Officials — who admit this will be a challenge — are aiming for a soft landing that cools demand by raising the cost of borrowing on everything from homes to autos, but doesn’t push companies to lay off workers.
The U.S. labor market is historically tight, with April’s unemployment rate of 3.6% near a 50-year low and two job vacancies for every one person looking for work. That’s pushing up wages and stoking inflation, alongside price rises caused by COVID-19 supply-chain tangles and the impact on energy and food costs of Russia’s invasion of Ukraine.
In addition to inflation, Biden and Powell will discuss the state of the U.S. and global economy and the recent confirmation of Lael Brainard, Lisa Cook and Philip Jefferson to the Fed board, a White House official said. Biden has urged the Senate to also confirm Michael Barr as the vice chair for supervision of the Federal Reserve, a key slot that oversees the banking industry.
— With assistance from Saleha Mohsin and Jennifer Jacobs.