The chair of the Federal Reserve, Jerome Powell, contradicted President Biden on Wednesday, stating that the persistent inflation problem is not due to Russian President Vladimir Putin.
The Biden administration has called the Ukraine conflict “the most significant single driver of inflation” as recently as Monday.
Sen. Bill Hagerty (R-Tenn.) asked Powell if Biden’s story — that Putin and the Ukraine war are to blame for America’s inflation problem — is correct, as Powell testified before the Senate Banking Committee.
“I get that there are several elements involved in the historical inflation we’re currently experiencing, including supply chain disruptions, restrictions on supply, rising price expectations, and too much fiscal spending,” Hagerty went on. “However, the issue didn’t emerge out of nowhere. In January 2021, prices were at 1.4%. By December 2021, they had risen by five times to 7 percent. The rate of inflation has increased gradually by another 1.6% to 8.6% since late February when the war in Ukraine began. So again: from 7% to 8.6%.”
“Given how rapidly inflation has climbed in the last 18 months, do you think that the Ukraine conflict is the primary cause of inflation in America?” the senator asked.
Powell crushed Biden’s narrative in a single statement.
“No, inflation has been persistent before. Before the war in Ukraine began, it was already very high,” Powell said.
Inflation, which reached 8.6 percent in May, has led to concerns that the aggressive actions taken by the Federal Reserve, which is needed to fight inflation, might cause a recession.
It’s a distinct possibility, according to Powell.
On the other hand, Larry Summers, formerly the Treasury Secretary, believes that a recession is virtually certain because of the Fed’s interest rates increasing.
“Nothing is certain. All economic predictions are subject to error, as is any forecast,” Summers advised on NBC. “I believe a recession will occur in the near term.”
“I make that decision based on the fact that we have not had a scenario like today’s inflation at 4 percent or unemployment at 4 percent without a recession following within a year or two,” he continued. “And so I believe the likelihood is high that to stop inflation, the Fed will have to increase interest rates enough to cause an economic downturn.”
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