Fed Chair Powell was the economic hero of the pandemic recovery. Now America has turned on him as inflation torches wallets.
Times have since changed. The labor market has quickly rebounded, but inflation now poses the greatest risk to the economic recovery. That problem is the Fed's to solve, and Powell is catching just as much flak today as he was winning acclaim one year ago.
While Congress was still finalizing its first round of stimulus checks and boosted unemployment benefits, the Fed had already rolled out all the tools in its toolbox and then some. That independence is now acting against the Fed's broad appeal. The Biden administration has punted most of the inflation problem to the central bank, with Brian Deese, director of the National Economic Council, tellingon June 10 that"the Fed has the tools that it needs, and we are giving them the space that it needs to operate."
The increases represent the central bank's best bet for cooling inflation, but the same lawmakers that cheered the Fed's emergency measures in 2020 are pushing back.