Fed chairman contradicts Biden, says Russia’s Ukraine invasion not the main inflation driver

Fed chairman contradicts Biden, says Russia’s Ukraine invasion not the main inflation driver

Federal Reserve Chairman Jerome Powell on Wednesday appeared to contradict President Biden’s repeated insistence that the Russian invasion of Ukraine was the main driver of inflation in the US.

During a Senate Banking Committee hearing, Sen. Bill Hagerty, R-Tennessee, got Powell to admit that inflation was high long before the Russian invasion of Ukraine on February 24.

Federal Reserve Chairman Jerome Powell speaks before the Senate Committee on Banking, Housing and Urban Affairs as he presents the Monetary Policy Report to the committee on Capitol Hill, Wednesday, June 22, 2022, in Washington. (AP Photo/Manuel Balce Ceneta/AP Newsroom)

Hagerty noted that in December 2021, inflation rose to 7%, up from 1.4% in January 2021, when President Biden took office. Since the Russian tanks crossed the Ukrainian border, inflation has risen steadily to its current level of 8.6%.

With these statistics established, Hagerty asked Powell if he believed the war in Ukraine was the “main driver” of inflation as the Biden administration has tried to portray.

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“No inflation was high … certainly before the war broke out in Ukraine,” 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 ‘biggest single driver of inflation’.”

“I’m glad you agree with me that that’s not the truth,” Hagerty told Powell.

Powell has tried to reassure the public that the Fed will raise interest rates high enough and fast enough to stifle inflation, without restricting credit so much that it strangles the economy and triggers a recession.

increase in gas prices

FILE PHOTO: Gasoline prices rise along with inflation as shown by this sign at a gas station in San Diego, California, U.S., November 9, 2021. (REUTERS/Mike Blake/File photo/Reuters Photos)

The central bank’s accelerating rate hikes (it started with a quarter-point increase in its key short-term rate in March, then a half-point increase in May, then three-quarters of a point last week) have alarmed investors and has led to sharp declines in financial markets.

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Powell’s testimony comes exactly one week after the Fed announced its three-quarter point hike, its biggest hike in nearly three decades, to a range of 1.5% to 1.75%. With inflation at a 40-year high, Fed policymakers have also forecast a faster pace of rate hikes this year and next than they had forecast three months ago, with their key rate hitting 3.8 % by the end of 2023. That would be its highest level in 15 years.

Associated Press contributed to this report.

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