Biden: Fighting inflation is the Fed's job
President Biden said Wednesday that fighting inflation is the job of the Federal Reserve, tacitly endorsing the central bank's shift toward higher interest rates.
Why it matters: Biden's comments made clear that Federal Reserve chair Jerome Powell will face no pushback from the White House as it moves toward tighter money, contrary to the typical political dynamics.
The big picture: With inflation of 7% in 2021, Biden's approval ratings are suffering and the Fed is trying to pivot abruptly away from its ultra-low interest rate policies without crashing the economy.
- Biden said in a news conference that "the critical job of making sure that the elevated prices don't become entrenched rests with the Federal Reserve."
- "Given the strength of the economy and the pace of recent price increases, it's appropriate, as … Fed chairman Powell has indicated, to recalibrate the support that is now necessary," he said, adding that he respects the central bank's independence.
The Fed was already on track to raise interest rates multiple times this year, from their current near-zero levels. Biden's comments make it clear the White House supports that effort.
- More typically, elected officials try to pressure central bankers to maintain loose money to stimulate growth. That's what former President Trump did in 2018 and 2019, and what the Reagan White House did when Paul Volcker led the Fed in the early 1980s.
The bottom line: The comments reflect the Biden administration's conviction that getting inflation under control is crucial to the president's political future — and that tools the administration directly controls are ill-suited to the job.