Powell, newly nominated by President Joe Biden for a second term, would disappoint many progressives and Fed watchers if he chooses to curb the central bank's efforts to boost the economy
Federal Reserve Chair Jerome Powell testifies during a Senate Banking, Housing and Urban Affairs Committee hearing on September 28, 2021 in Washington, D.C. | Kevin Dietsch/Getty ImagesProgressives widely praised Federal Reserve Chair Jerome Powell last year for a historic shift in policy when he pledged to keep interest rates near zero until the economic recovery was felt by most Americans.
“The central bank should express a more realistic understanding of inflation and firm up monetary policy by tapering its asset purchases more quickly,” Jason Furman, a Harvard professor who chaired Obama's Council of Economic Advisers, wrote in The Wall Street Journal. “They have a dual mandate. They have to take inflation into account even if the economy isn’t yet at maximum employment.”“addressing inflation will mean raising interest rates, perhaps sooner than it thinks necessary.
Powell’s actions on this front are part of what led him — a Republican and former private equity investor — to secure the backing of some prominent progressives such as former Labor Secretary Robert Reich and Rep. Pramila Jayapal , who heads the Congressional Progressive Caucus. “Because inflation has become the main worry, they’re less willing to test the limits of maximum employment,” said Derek Tang, an economist at Monetary Policy Analytics.
“The Fed could potentially have a Goldilocks moment in the first half of next year where you still have reasonably strong growth, elevated inflation, but having achieved full employment, so it creates the right conditions to raise rates,” said Dana Peterson, chief economist at the Conference Board, a business research firm that publishes economic indicators.
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