WASHINGTON, May 31 (MENA) - President Joe Biden said he would support the Federal Reserve in its effort to combat high inflation by reducing economic demand, as the central bank lifts interest rates at its fastest pace in more than three decades.
Biden outlined a broad three-part plan for addressing inflation, which is running at 40-year highs, in an opinion piece published Monday evening in The Wall Street Journal. He is set to meet with Fed Chairman Jerome Powell on Tuesday at the White House, the first such meeting since Mr. Powell was tapped by Biden and confirmed to a second four-year term by the Senate on May 12.
Biden said it was likely that the pace of job growth could slow from a monthly pace of 500,000 jobs to around 150,000 as a necessary result of the Fed’s efforts to combat high inflation.
“The most important thing we can do now to transition from rapid recovery to stable, steady growth is to bring inflation down,” Biden said. He said he agreed with the Fed’s assessment “that fighting inflation is our top economic challenge right now.”
Senior White House advisers in recent weeks have been focused on improving their messaging around high inflation, a liability in this fall’s midterm congressional elections. Consumer confidence has slumped amid rising prices of food and gas.
The Fed is in the process of raising interest rates at the most aggressive pace since the 1980s. Minutes from the Fed’s May 3-4 policy meeting, released last week, show the central bank is likely to lift its benchmark interest rate, currently in a range between 0.75% and 1%, by a half-percentage point at its next two meetings, in June and July.
While elected officials have favored low rates in the past to boost economic growth, lawmakers in both parties have broadly supported the Fed’s efforts to raise interest rates, with some criticizing the Fed for having waited too long to do so.
The second pillar of Biden’s plan called for taking “every practical step to make things more affordable for families…and to boost the productive capacity of the economy over time.”
Biden cited a list of proposals, including to upgrade infrastructure, boost housing production, lower drug prices by giving Medicare the power to negotiate with pharmaceutical companies, fix disrupted supply chains and target fees charged by foreign ocean-shipping companies.
Republicans have criticized the White House for advancing steps to combat climate change that seek to slow or curtail the production of domestic energy from fossil-fuel sources. They say that has exacerbated the energy price increases aggravated by Russia’s war in Ukraine.
The third piece of Biden’s proposal calls for reducing federal budget deficits, which had increased sharply even before Congress and two different presidential administrations approved a combined $6 trillion in spending to address the coronavirus pandemic.
Federal revenues have surged this year and individual income taxes as a share of economic output are reaching record highs. The Congressional Budget Office last week said it expects federal budget deficits as a share of GDP to fall to 3.8% next year from 4.2% this year before rising through the middle of the coming decade.
Powell was initially appointed to lead the central bank in 2018 by former President Donald Trump, who subsequently soured on the Fed leader and repeatedly criticized him in public statements.