Fed nom: Fighting inflation is priority
WASHINGTON — Lael Brainard, President Biden’s nominee for the Federal Reserve’s No. 2 spot, said Thursday that combating high inflation is the central bank’s top priority and said she believed the Fed could reduce it without sacrificing economic growth.
Testifying at her confirmation hearing before the Senate Banking Committee, Brainard noted that inflation is “too high, and working people around the country are concerned about how far their paychecks will go.”
“We are taking actions … that I have confidence will be bringing inflation down, while continuing to allow the labor market to return to full strength over time,” she said. Fighting inflation is “our most important task.”
Brainard’s elevation of inflation-fighting as the Fed’s top goal is notable given that she is, for now, the lone Democrat on the Fed’s board and has long been seen as inclined to keep interest rates low to boost employment. Her stance reflects the abrupt pivot the Fed has recently made under Chair Jerome Powell toward making inflation-fighting its top priority.
Biden nominated Brainard to be the Fed’s vice chair in late November, the same day that he announced he would nominate Powell for another four-year term as Fed chair.
Both Brainard and Powell are expected to win approval from the committee and final confirmation by the full Senate in the coming weeks.
On Wednesday, the government reported that inflation spiked to 7% in December from a year earlier, the sharpest such increase in four decades. The acceleration of consumer prices has thrust Fed policy into the spotlight.
Several Republican senators expressed concern that the Fed might increasingly take account of climate change in its policymaking and use its supervisory authority over banks to discourage
‘We are taking actions … that I have confidence will be bringing inflation down, while continuing to allow the labor market to return to full strength over time.’ Fighting inflation is ‘our most important task.’
LAEL BRAINARD President Biden’s nominee for Fed vice chair
them from lending to oil and gas companies. Brainard pushed back on the idea.
“We would not want to tell banks what sectors to lend to, or not to lend to,” she said.
Sen. Steve Daines, a Republican from Montana, questioned whether the Fed has the “experience or expertise” to incorporate climate change into its regulation of banks. Last year, Brainard had suggested that the Fed should evaluate scenarios in which climate change could harm the financial system. An example would be widespread lending losses or insurance payouts resulting from weather disasters.
Brainard said the Fed did not engage in “environmental policy” but still has a duty to evaluate possible risks.
“We do have some sort of responsibility for understanding potential financial stability implications of a host of different kinds of things,” she said. “We don’t have any expertise in disease and pandemics. But certainly it turned out that the pandemic had enormous financial stability consequences.”