By Ann Saphir and Jonnelle Marte
– U.S. President Joe Biden’s nominees to the Federal Reserve Board came out swinging against high inflation on Wednesday, saying rising prices pose a threat to economic growth and stopping that trend is a paramount task for the central bank.
“Our most important task is tackling inflation,” Michigan State University economics professor Lisa Cook, one of three Fed nominees up for a confirmation hearing at the U.S. Senate on Thursday, said in her prepared remarks.
The Fed must “ensure that inflation declines to levels consistent with its goals,” wrote nominee Philip Jefferson, dean of faculty at Davidson College, while former Fed governor Sarah Bloom Raskin said reducing inflation must be a “top priority while we continue to sustain our economic recovery.”
The three Fed nominees had been widely seen as leaning dovish, in part because Cook’s research focused on inequality and Jefferson’s on poverty, suggesting that they might tolerate inflation for the sake of a stronger labor market.
Their written testimony released Wednesday strongly countered that assumption.
Consumer prices rose 7% last near — more than twice the Fed’s 2% goal — cheapening American wages, eating into household budgets, and becoming an increasing political liability for Biden, whose popular standing has suffered as inflation has soared.
Fed policymakers have signaled they will start raising interest rates next month, perhaps at a pace not seen in decades, as they scramble to cut short the upward price trend that threatens to undermine the recovery from the pandemic recession. The remarks from the nominees suggest they will join in those efforts once confirmed.
FOLLOWING VOLCKER
Still, Thursday’s hearing, scheduled for 8:45 a.m. E.T., promises to be a heated one.
Democrats have praised the nominees, and Republicans have panned them, taking particular issue with Raskin and what they see as her intent to use her position as the Fed’s vice chair of supervision to starve oil and gas companies of credit. The White House has stepped in to try to turn the tide.
Raskin in her testimony said it is not the Fed’s role to tell banks where to lend.
Cook and Jefferson, both Black economists whose addition to the currently all-white Fed Board would make it the most racially diverse in the central bank’s 108-year history, have received far less attention.
But their monetary policy views could be consequential as the Fed joins its first real battle with inflation in decades.
Cook in her testimony invoked Paul Volcker, the Fed chair who personified the central bank’s battle with 1970s inflation, saying she would follow his example of political independence.
“High inflation is a grave threat to a long, sustained expansion, which we know raises the standard of living for all Americans and leads to broad-based, shared prosperity,” Cook said. “That is why I am committed to keeping inflation expectations well anchored.”
Jefferson also warned the inflation spike could lift inflation expectations. “The Federal Reserve must remain attentive to this risk and ensure that inflation declines to levels consistent with its goals,” he said.
Nominees must win approval from a majority on the Democrat-controlled Senate Banking committee before their consideration by the closely divided full Senate.
A tentative date for a vote on Biden’s nominees, including the renomination of Fed Chair Jerome Powell and the elevation of Fed Governor Lael Brainard to the post of Fed vice chair, has been set for Feb. 15.
(Reporting by Ann Saphir and Jonelle Marte; editing by Chris Reese and Richard Pullin)
