US lawmakers warn Fed about recession, urge focus on price stability
'Fed should be laser-focused on its price stability mandate,' says congressman from state of Kentucky
US lawmakers warned the Federal Reserve about a recession Thursday and urged the central bank to focus on price stability, during Fed Chair Jerome Powell's testimony before the House of Representatives Committee on Financial Services.
Committee Chairwoman Maxine Waters said the price of housing, gasoline and groceries have skyrocketed.
"While it is important for the Fed to fight inflation, I would caution against any approach that ignores the Fed's maximum employment mandate and results in a recession with millions of people losing their homes and jobs," she said.
The Democratic congresswoman from the state of California noted that low-income workers have turned to cryptocurrencies to generate wealth but urged the Fed to work with regulators to oversee the crypto market.
Republican congressman Andy Barr from the state of Kentucky said he hopes the Fed would rise to the occasion to fight inflation.
"Specifically, the Fed should be laser-focused on its price stability mandate, and even as you acknowledge the risk of recession, and as everyone desires a soft-landing, I encourage the Fed to have fortitude to prioritize defeating this inflation scourge," he said.
Patrick Timothy McHenry from North Carolina said the 40-year high inflation rate is hurting Americans with rising prices for gasoline, food, airfare, cars, medical care and clothing.
"How the Fed manages the next few months will be as critical as any other period during the last four decades," said the Republican congressman. "The Fed should be focused on price stability. That should be their single-minded focus at this moment."
McHenry criticized President Joe Biden's almost $2 trillion American Rescue Plan that was signed into law in March 2021 and pointed to the stimulus bill as the main cause of inflation.
Powell said most price increases are seen in sectors where supply is constrained and demand is strong. "Demand for cars went up a great deal during the pandemic when people wanted riding cars rather than public transportation," he said.
"Our job is to keep maximum employment and price stability,” he said. “Our commitment to fight inflation is unconditional. If (interest) rates are higher, then demand for cars will moderate, decline a bit.” He added that the war in Ukraine is rising energy prices and driving up gasoline prices in the US.
New York Democrat Gregory Meeks asked Powell if it is possible to resolve inflation without increasing unemployment.
Powell said there is a risk that unemployment would move up but it would be from a historically low level.
Senator Elizabeth Warren, a Democrat from Massachusetts, warned the Fed on Wednesday that aggressive rate hikes could tip the American economy into a recession.
Although Powell told a Senate committee the US economy is strong enough to handle the rate increases, he noted that a recession is "certainly a possibility."
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