SENATE CONFIRMS POWELL
Gets 2nd term as Fed chief, warns ‘soft landing’ may not be possible
WASHINGTON — The Senate on Thursday confirmed Jerome Powell for a second four-year term as Federal Reserve chair, giving bipartisan backing to Powell’s highstakes efforts to curb the highest inflation in four decades.
The 80-19 vote reflected broad support in Congress for the Fed’s drive to combat surging prices through a series of sharp interest rate hikes that could extend well into next year. The Fed’s goal is to slow borrowing and spending enough to ease the inflation pressures.
Since February, when his first term expired, Powell had been leading the central bank in a temporary capacity.
He faces a difficult and risky task in trying to quell inflation without weakening the economy so much as to cause a recession. The job market remains robust and has strengthened to a point that Powell has said is “unsustainably hot” and contributing to an overheating economy.
Later Thursday, Powell acknowledged for the first time in an interview on NPR’s “Marketplace” that high inflation and economic weakness overseas could thwart his efforts to engineer a “soft landing” for the economy and avoid causing a recession.
“The question whether we can execute a soft landing or not — it may actually depend on factors that we don’t control,” the Fed chair said. “There are huge events, geopolitical events going on around the world, that are going to play a very important role in the economy in the next year or so.”
In his interview with NPR, Powell also seemed to suggest that the Fed would at least consider raising its benchmark rate by an extremely large three-quarters of a point if inflation failed to show signs of easing in the coming months. Last week, the stock market initially soared when Powell appeared to take a three-quarter-point rate hike off the table.
After repeating his comment from last week that half-point hikes were likely at each of the next two Fed meetings, in June and July, Powell added Thursday: “If things come in better than we expect, then we’re prepared to do less. If they come in worse than when we expect, then we’re prepared to do more.”
Powell’s support Thursday in the Senate was roughly in line with what he received four years ago, after he was first nominated as chair by President Donald Trump. At that time, the Senate voted 84-13 to confirm him.
To some degree, Powell’s support in Congress reflects the blame that most Republicans assign to President Joe Biden’s $1.9 trillion COVID relief package — rather than to the Fed’s ultra-low rates — for causing high inflation. Many economists, including those who have served in previous Democratic administrations, agree that Biden’s legislation played a role in accelerating prices.
Powell’s confirmation comes as many economists have sharply criticized the Fed for waiting too long to respond to worsening inflation, making its task harder and riskier.