On Wednesday, Federal Reserve Chairman Jerome Powell appeared to contradict President Biden’s repeated insistence that Russia’s invasion of Ukraine was the main driver of inflation in the United States.
At a Senate Banking Committee hearing, Sen. Bill Hagerty, R-Tenn., had Powell admit that inflation was high long before Russia’s Feb. 24 invasion of Ukraine.
Hagerty noted that by December 2021 inflation had risen to 7% from 1.4% in January 2021 when President Biden took office. Since the Russian tanks crossed the Ukrainian border, inflation has gradually increased to its current level of 8.6%.
With those statistics spelled out, Hagerty asked Powell if he thought the war in Ukraine was the “main driver” of inflation, as the Biden administration tried to portray it.
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“No inflation was high…certainly before the war in Ukraine broke out,” Powell said.
“I’m glad to hear you say that. The Biden administration seems intent on deflecting blame,” Hagerty said, noting that as recently as Sunday the administration “spread misinformation that the invasion of Ukraine by Putin was the ‘single biggest driver of inflation.'”
“I’m glad you agree with me that’s not the truth,” Hagerty told Powell.
Powell sought to reassure the public that the Fed will raise interest rates high enough and fast enough to stifle inflation, without tightening credit to the point of strangling the economy and causing a recession.
The acceleration of central bank rate hikes – it started with a quarter-point hike in its short-term policy rate in March, then half a point in May, then three-quarters of a point last week – alarmed investors and led to sharp decline in financial markets.
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Powell’s testimony comes exactly a week after the Fed announced its three-quarter point hike, its biggest hike in nearly three decades, in a range of 1.5% to 1.75%. With inflation at a 40-year high, Fed policymakers are also forecasting a faster pace of rate hikes this year and next than they forecast three months ago, with its key rate hitting 3, 8% by the end of 2023. That would be its highest level in 15 years.
The Associated Press contributed to this report.