Federal Reserve Chair Jerome Powell has mostly escaped political criticism for inflation as Republicans blame Democrats, who in turn blame Russia and greedy corporations. That may be changing.
Scorching price pressures are expected to push the Fed to raise interest rates 75 basis points on Wednesday for the second straight month. The tougher it acts, the harder it gets to avoid a sharp increase in unemployment and the subsequent political fallout.
“There has been more than enough blame for inflation to go around,” said Mark Spindel, chief investment officer for MBB Capital Partners LLC. If unemployment rises, “constituents will scream and senators and House members will have to deflect blame, and that will find its way to Jay Powell.”
Powell and his colleagues, who have a dual mandate from Congress for maximum employment and price stability, admit they got the inflation call wrong last year and were slow to react.
Democrats face losses in November elections from voters furious over inflation, and some of them are starting to warn Powell to expect consequences if rising joblessness is the cost of a Fed error.
“What’s worse than high inflation and low unemployment?” asked Senator Elizabeth Warren as the Fed chief gave congressional testimony last month. “It’s high inflation and a recession with millions of people out of work.”
“I hope you’ll reconsider that,” she added, “before you drive this economy off a cliff.”
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