Powell testifies to Congress on the economy and how the Fed plans to fight inflation — 6/23/22

that's cool here foreign so my the chair is authorized to declare recess of the committee at any time before we get started with today's hearing i would also like to ask unanimous request to adopt this resolution that was made available to all members that names our newest committee member mr norman to his subcommittee assignments without objection it is so ordered this hearing is entitled monetary policy and the state of the economy i now recognize myself for four minutes to give an opening statement welcome back chair powell and congratulations on your confirmation as chair of the fed since you last came before the committee americans continue to struggle to make ends meet as the price of housing gas 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 i hope you will also note that you should have noted that last week the house passed my bill h.r 2543 the financial services racial equity inclusion and economic justice act which directs the federal reserve to consider the impact of all of its decisions including setting interest rates on communities of color and underserved communities congress has a role in fighting inflation also housing is one of the largest contributors to inflation and the housing shortage has allowed corporate landlords to hike of rent forcing families to make difficult cuts elsewhere in their budgets the fed's interest rate hikes will make borrowing more expensive and thereby could help reduce out-of-control housing prices but without action by congress inflation air pressures will remain because there is simply not enough affordable housing being built and there won't be until congress makes necessary investments that's why it's so important that we pass the housing title of the build back better act which provides over 150 billion towards new housing construction modernizing existing structures for the long term and providing supports to people can be stably housed we're also facing corporate consolidation and greed without healthy competition to drive down prices mega corporations driven by profit or exploiting their economic power to squeeze americans to the breaking point democrats in congress put forth solutions to tackle inflation but my colleagues across the aisle have consistently voted against every solution let me go over some examples democrats passed a bill with 28 million dollars in funding to address the baby formula shortage but republicans voted no we passed legislation to crack down on price gouging from oil gas companies and republicans voted no last week democrats passed by racial equity inclusion and economic justice act and you guessed it republicans voted no republicans can talk about problems but they have zero solutions let's also not forget that the federal reserve has more duties beyond monetary policy bank mergers and banking deserts are affecting access to credit for low-income consumers and communities of color and working families who turn to cryptocurrency to generate wealth are now seeing their hard-earned savings disappeared now more than ever the federal reserve must work with other regulators to properly oversee the cryptocurrency market and provide guidance on a more stable alternative to volatile crypto currencies lastly the confirmations of lisa cook susan collins and phillip jefferson are historic but more must be done to ensure diversity at the federal reserve so chair powell i look forward to hearing your testimony this morning and i now recognize the ranking member of the committee the gentleman from north carolina mr mckinney for four minutes to give an opening statement and for those who may have please get muted so that mr mchenry can give his statement thank you madam chair and uh thank you chairman powell for being back with us a year ago president biden tried to buy support by signing into law a two trillion dollar stimulus bill what he did was sell ordinary americans who are now repaying all that quote unquote free money inflation is the worst it's been in 40 years american families are rethinking their long-awaited summer vacations because they can afford a five dollar gallon uh price at the pumps costs are spiraling out of control for everything from housing and food to airfare cars medical care and clothing democrats are still on the hunt for the scapegoat they blamed oil companies the war on ukraine and supply chain issues in asia but let's be clear it's the democrats trillions in wasteful spending that resulted in higher grocery bills and soaring gas prices president biden continues to deny that the so-called american rescue plan contributed to inflation recently calling that idea quote bizarre well economists across the ideological spectrum from former clinton treasury secretary larry summers to jason furman to michael strain don't think it's bizarre even the left-leaning san francisco fed found that the american rescue plan contributed to price increases so now millions of americans need to be rescued from the democrats american rescue plan i'm confident chair powell is taking this emergency seriously as i've said many times before i think he's the right man for the job and he is but how the fed manages the next few months will be as critical as any other period during the last four decades no one at the central bank was prepared for prices rising at a clip of 8 percent with even core inflation rising and running at 6 percent now republicans have long warned about the size of the fed's balance sheet but it grew by nearly a trillion dollars over the last 12 months alone and uh and now it seems the previous predictions by the open markets committee about economic projections are wrong and they are altering course simply put the fed has its work cut out for it lastly i want to address the left's ongoing efforts to expand the fed's dual mandate republicans have been on the record opposing this and i hope that the skyrocketing inflation unleashed under the biden administration puts an end to these discussions the fed should be focused on price stability that should be their single-minded focus at this moment in time it's out of touch for democrats to keep pushing mission creep at the fed when american families are struggling to feed themselves and to get work the fed is a serious place with serious business to attend to it needs to focus on the middle class not the chirping political class this was true before inflation broke out it's all the more obvious to today i hope that chair powell will deliver that message to his colleagues throughout the institution and again i want to thank chair powell for his testimony thanks for his willingness to engage uh with policymakers on the hill uh and thank you for his openness and what has been a more closed off institution we have a mess to clean up and we know that you're taking your job seriously i'm glad you're taking your job seriously and with that madam chair i yield back thank you ranking member mack henry i now recognize the chair of the subcommittee on national security international development and monetary policy the gentleman from connecticut mr himes for one minute to give an opening statement thank you madam chair and welcome uh chairman powell congratulations on your confirmation um i don't remember a moment as consequential as this one for the federal reserve or as potentially testing of its leadership i think i have to go back to the end of 08 in the first quarter of 09 to think of a moment that was quite as important as americans watched the economy collapse around their ears and the and their jobs and assets being lost there is a very real possibility that americans will be caught in a vice an economic vice not of their own making between inflation which makes their everyday lives unaffordable and the possibility much contemplated by economists of a recession simply put as one of the last members of congress to get out of the chamber when it was under attack on january 6 2021 i don't believe that our democracy can sustain either runaway inflation or another recession and despite the rhetoric you'll hear all day today here there's not a lot that we can or will do much of this rests on your shoulders so chairman powell i just ask that as you make your decisions you think not just of the numbers and the economics but of the importance of sustaining this nation's democracy thank you mr holmes i now recognize the ranking member of the subcommittee on national security international development and monetary policy the gentleman from kentucky mr barr for one minute to give an opening statement as we face the worst inflation the country has seen in four decades i am encouraged to have mr powell leading our central bank and i'm hopeful the fed will rise to the occasion at the same time it's important to remember the following just last year democrats were ignoring inflation warnings to pass a two trillion dollar stimulus bill they were pushing the fed to solve climate change and social ills and they flirted with unconventional monetary tools like yield curve control today as gas prices top five dollars a gallon these left-wing ideas seem like a fever dream from an alternative universe but many democrats fell them for the fell for them at the time and they'll likely pursue them again if inflation subsides the lesson for the fed is clear it needs to focus on doing a limited number of jobs well and not get distracted by those who want it to be all things to all people 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 chair powell i hope you are hammering this message home at the fed as ordinary americans see their paychecks eaten away under democrat mismanagement of our economy i want to welcome today's distinguished witness the honorable jerome powell chair of the board of governors of the federal reserve system without objection your written statement will be made part of the record chair powell you are now recognized for five minutes to present your oral testimony chairman chairwoman waters ranking member mchenry and other members of the committee i appreciate the opportunity to present the federal reserve's semi-annual monetary policy report and i'll begin with one overarching message at the fed we understand the hardship that high inflation is causing we are strongly committed to bringing inflation back down and we're moving expeditiously to do so we have both the tools we need and the resolve it will take to restore price stability on behalf of american families and businesses it is essential that we bring inflation down if we are to have a sustained period of strong labor market conditions that benefit all i will review the current economic situation before turning to monetary policy inflation remains well above our longer run goal of 2 over the 12 months ending in april total pce prices rose 6.3 percent excluding the volatile food and energy categories core pce prices rose 4.9 the available data for may suggests that the core measure likely held at that pace or eased slightly last month aggregate demand is strong supply constraints have been larger and longer lasting than anticipated and price pressures have spread to a broad range of goods and services the surge in prices of crude oil and other commodities that resulted from russia's invasion of ukraine is boosting prices for gasoline and fuel and is creating additional upward pressure on inflation and covet 19 related lockdowns in china are likely to exacerbate ongoing supply chain disruptions over the past year inflation has also increased rapidly in many foreign economies as discussed in a box in the june monetary policy report overall economic activity edged down in the first quarter as unusually sharp swings in inventories and net exports more than offset continued strong underlying demand recent indicators suggest that real gdp growth has picked up this quarter with consumption spending remaining strong in contrast growth in business fixed investment appears to be slowing and activity in the housing sector looks to be softening in part reflecting higher mortgage rates the tightening and financial conditions that we have seen in recent months should continue to temper growth and help bring demand into better into better balance with supply the labor market has remained extremely tight with the unemployment rate near a 50-year low job vacancies at historic highs and wage growth elevated over the past three months employment rose by an average of 000 jobs per month down from the average pace seen earlier in the year but still robust improvements in labor market conditions have been widespread including for workers at the lower end of the wage distribution as well as for african americans and hispanics a box in the june monetary policy report discusses developments in employment and earnings across all major demographic groups labor demand is very strong while labor supply remains subdued with the labor force participation rate little imposes available hardship especially on those least able to meet the higher costs of essentials like food housing and transportation we're highly attentive to the risks that high inflation poses to both sides of our mandate and we're strongly committed to returning inflation to our two percent objective against the backdrop of the rapidly evolving economic environment our policy has been adapting and it will continue to do so with inflation well above our longer run goal of two percent and an extremely tight labor market we raise the target range for the federal funds rate at each of our past three meetings resulting in a one and a half percentage point increase in the target range so far this year the committee reiterated that it anticipates that ongoing increases in the target range will be appropriate in may we announced plans for reducing the size of our balance sheet and shortly thereafter began the process of significantly reducing our securities holdings financial conditions have been tightening since last fall and have now tightened significantly reflecting both policy actions that we have already taken and anticipated actions over coming months we will be looking for compelling evidence that inflation is moving down consistent with inflation returning to two percent we anticipate that ongoing rate increases will be appropriate the pace of those changes will continue to depend continue to depend on the incoming data and the evolving outlook for the economy we will make our decisions meeting by meaning and we will continue to communicate our thinking as clearly as possible our overarching focus is using our tools to bring inflation back down to our two percent goal and to keep longer-term inflation expectations well anchored making appropriate monetary policy in this uncertain environment requires a recognition that the economy often evolves in unexpected ways inflation has obviously surprised to the upside over the past year and further surprises could be in store we therefore will need to be nimble in responding to incoming data and the evolving outlook and we will strive to avoid adding uncertainty in what is already an extraordinarily challenging and uncertain time we're highly attentive to inflation risks and determined to take the measures necessary to restore price stability the american economy is very strong and well positioned to handle tighter monetary policy to conclude we understand that our actions affect communities families and businesses across the country everything we do is in service to our public mission we at the fed will do everything we can to achieve our maximum employment and price stability goals thank you and i look forward to your questions thank you very much chairman powell chair paul at your senate confirmation hearing you were asked about the possibility that inflation is being driven by corporations and concentrated sectors of the economy you said and i quote that could be right it could also just be though the demand is incredibly strong and that you know they're raising prices because they can quote unquote we're all seeing and feeling the effects of inflation on consumer pocketbooks but corporate profit margins are not hurting in 2021 the profit margins of the s p 500 index surplus 20 12 the highest profit margin on record and is expected to be even higher in 2020. corporate greed and consolidation are driving higher and higher prices for consumers above and beyond any inflationary pressures just last quarter tyson foods which sells one out of every five pounds of meat sold in the united states claimed that their higher prices are due to rising labor and freight costs yet they still managed to net an additional half a billion in quarterly profits when it comes to rents a corporate landlord recently remarked and i quote we have an unprecedented opportunity to really press rent on renewals because the country is highly occupied and so where are people going to go they can't go anywhere we have a tremendous opportunity to press both on renewing leases for existing residents and to reset market rates which we've reset numerous times even this year end of quote this kind of blatant profiteering on the backs of hard-working families is simply outrageous could you elaborate on the role that corporations play in setting prices and how that is affecting inflationary pressures today would you also elaborate on what you meant when you said perhaps corporations are raising prices quote because they can sure so um so matters of uh concentration in the economy um represent a series of interesting questions that are largely not settled for for one thing it is clear that that our economy has become more concentrated largely due to lower levels of formation of smaller businesses that has happened it is not at all clear that there's a connection between um between a more concentrated economy and for example inflation and of course matters of corporate concentration are outside the jurisdiction of the fed we really those are for the for the competition authorities and really not for us to to discuss um in terms of what's why prices are going up i think a lot of it has been a lot of the places where prices have gone up quite a bit have been situations where supply is constrained and demand is very strong and so take cars for example demand for cars went up a great deal during the pandemic people wanted to ride in cars rather than public transportation and and they wanted to move to the suburbs and things like that rates were low the economy was stronger than than people expected but the companies couldn't really make more cars because they couldn't raise their output because of the lack of semiconductors so when when demand hits fixed supply what happens is prices go up and margins went up and so i think as the economy returns to normal we would expect those profit margins to return to more normal levels well um chairman powell the example that i gave of tyson who said their prices were rising because of labor and freight causes and yet they managed to net an additional half a billion quarterly profits that i apologize i'm having i'm having a hard time hearing your words i'm sorry okay um the example that i gave of tyson foods uh and the fact that they said uh that their prices were rising due to labor and freight costs yet they managed to net an additional half a billion in quarterly profits how do you explain that i i'm not familiar with their with their profit and loss statement but i i will say and again there may be particular industries where there are competition issues i don't know that it's really not our focus or our authority well do you have the opportunity to look at rising costs and identify corporations where they are gaining substantial profits yet um they keep raising their prices do you have a way of of examining that i think we can see that but i i think you know our job is to keep you know uh maximum employment and price stability so we're not we're not in the business of regulating individual companies uh or determining whether their actions for example are anti-competitive or uh that sort of thing that's more for elected people and also for the competition authorities so we do look at that and but again i think a a great deal of the price increases that you saw were were a matter of supply being unable to meet demand and the result was prices moving up in in many cases that was the story thank you very much the gentleman from north carolina mr mchenry who is a ranking member of the committee is now recognized well thank you madam chair i i would uh on this debate about uh corporate corporate profits i would uh commend the committee uh uh secretary yellen's statement that where she rejects the idea of corporate greed is is to blame for inflation uh and i concur um we have we have a complex set of issues the fiscal house was certainly different than monetary policy and the extraordinary nature of the partisan american rescue plan and two trillion dollars injected into recovering economy and democrat policies to keep people out of the workforce for longer than the rest of the western worlds also contributed to inflation uh so that that is a political debate here on capitol hill uh chairman powell and that is on the the political side what i want to ask you about are the policy tools that you are using um now certainly you as chair of the fed in the open markets committee took extraordinary measures in the midst of the pandemic to ensure that we didn't have further contagion including extraordinary lending facilities purchasing securities keeping the funds federal funds rate at zero uh these were the right tools at the right time on the fiscal side you had a partner with bipartisan bills to keep our economy afloat during government shutdowns but like all the good firefighting measures we should put them away when times change i want to talk to you as you put these measures away how you expect the economy to respond so let's start here what is your level of commitment to fight inflation well so it's unconditional our commitment is and the reason is that um we need to in a particular situation we have a a labor market that's sort of unsustainably hot and we have we're very far from our inflation target we really need to restore price stability get inflation back down to two percent because without that we're not going to be able to have a sustained period of maximum employment where the benefits are spread very widely and where people's wages aren't being eaten up by inflation really it's it's something that we need to do we must do uh in in order to to have that kind of a labor market we'll need to do it so as you pull back these uh emergency measures from kovid and you normalize rates to what they look like sort of in the long run uh how do you expect the economy to respond so when we um when we raise interest rates uh and also to to a lesser extent when when the balance sheet uh shrinks what happens is uh rates go up across the economy and financial conditions generally tighten and it's you can think of it as in interest sensitive spending is an important place that'll be affected and that's things like automobiles and other durable goods if rates are higher then demand for cars will will moderate will decline a bit uh the second channel would be asset prices generally we don't target any particular asset prices but higher interest rates tend to bring them down broadly that tends to mean a little bit less spending out of out of because people's wealth has perhaps declined a little bit and the third channel can be the exchange rate where that also has disinflation effect so overall we have these these effects on the economy our intent of course is to bring inflation down to two percent while preserving a strong labor market as i've mentioned that has become significantly more challenging with the events of of the past few months particularly the war which is which is driving gas prices up and raising energy prices and also food prices and disrupting supply chains further so at the same time you have a massive balance sheet um so first begin with mortgage-backed securities uh as we have a roll-off of of the fed's balance sheet of mortgage-backed securities what are expectations for how that affects housing so i think what will affect housing is the rate the housing uh industry is and market are slowing down uh from a very very hot pace and uh that's partially because of higher mortgage rates the effects of uh shrinking the balance sheet will be marginal compared to the effects that we're seeing and expect to continue to see from rates rise rising and rising mortgage rates but what are your expectations and any further announcements can we can we expect further announcements on um on uh the assets you hold and the securities you hold are there gonna be balance sheet uh announcements in the coming weeks no i so i i would say this we have a plan we've articulated it the markets are forward-looking they see it they it and the markets are uh in a good place i think understanding what we're going to do and that's we're going to be allowing these these securities to mature and run off our balance sheet at a pace that we've said and it'll be 90 or 95 95 billion i guess by by september now it's about half of that so um that's what we've done and we expect you know the idea is that that'll just be on an ongoing basis in the background and we think the markets can handle that you know treasury issuance is way down so we think there will be demand for these for these securities the treasury will then reissue them in whatever form they think is appropriate when it relates to treasuries so thank you the gentleman from new york mr meeks who is also the chair of the house committee on foreign affairs is now recognized for five minutes thank you madam chair mr chair uh it's good to see you and i know you'll hear a lot of probably political stuff going back and forth but the american public is trying to understand the language of which we're talking today uh so that we can really understand what inflation is fact of the matter is uh i just recently was over in europe uh there's there's inflation in europe just like there's inflation here although as i talked to christine lagarde and others they say the cause of the inflation may be different so if the causes are different they said that maybe demand uh here uh but not a case of demand there is the res to resolve inflation in europe for example i was in moldova 30 inflation rate gas 15 a gallon turkey 80 inflation rate gas 13 a gallon uh and i could name places in europe and europe from europe to the united states is it that we had you know whether it was the it's the supply chains the china shutdown complete shutdown uh zero covert policy um russia's war in ukraine uh covet period isn't just a massive storm of everything is what contributes to uh inflation and causes it all over the world pretty much yeah that's pretty good it's a little bit of everything right so if i'm talking to my constituents trying to explain to them what inflation is and what causes it i would not single out any one thing i would probably have to talk about the conglomerate of things because if you take away two or three or those we might not be in the situation here all of it unprecedented all of it really out of the control of anyone out of control of democrats out of control of republicans out of control of the president out of control of other governments is that not correct so some some of it is out of our control for example the price of oil and and most of the price of food um and to your point your europe has much more it's much more about energy and food prices very difficult problems and also they of course have the european central bank has different countries which uh and so they have they have to worry about the difference but the spreads to between different countries and that that's a different challenge that we don't have here we have the difference here for us is we actually have a very strong economy and well-recovered economy and so more of our inflation is from demand and we do have tools to deal with demand that is that is the place where we actually can work and that's what we're using our tools and some of that was because during the crises that we had we had to do certain things you know stimulus and other things to make sure that we kept our economy stable i mean if without doing those things we would have been in trouble so the things that we did going through covert the stimulus trying to make sure people kept their jobs or kept money coming in at the time was what we had to do otherwise we would have been in worse shape or not have a strong economy as we have now compared to other countries is that not correct yes i would say this way that our inflation is a consequence of very strong demand in part driven by supply by uh what what congress did to support activity import driven but we did but also but that helped stabilize our economy at that time right it did and if we did not do those things our economy may not be as strong as it is right now i think that's right that's correct our economy is strong and let me jump to something else real quick because the one other thing you know i know you testified before the senate yesterday and what concerned a number of my constituents that i talked to was the question about um can we resolve inflation without increasing unemployment because our folks are concerned about losing their jobs and not being able to you know it'd be worse if they were unemployed so my question to you is can you speak to what the fed has seen during the last few years with respect to the relationship between unemployment and inflation and is it possible that we can continue to have a strong labor market while also curbing inflation it's certainly possible that we can um and there is a relationship between between unemployment and inflation the challenge now is that inflation is at a four decade high and some of it is some of it we can deal with some of what is really going to be dealt with on global markets the price of oil and that kind of thing we can't affect those but the challenge is we're tightening we're tightening monetary policy and that's designed to to drive growth down to a level that's more sustainable and lower give the supply side a chance to catch up and give inflation a chance to come down and bring inflation down that's what we're trying to do we don't have precision tools and it we you know we're we we raise in lower interest rates it affects the whole economy through many channels and so there is a risk that that that you know that uh that unemployment would move up from what is a historically low level though a labor market with 4.1 percent or 4.3 percent unemployment is still a very strong labor market today's rate is 3.6 percent and there are two vacancies for every unemployed person so that's that's the labor market that's kind of overheated the gentlewoman from missouri mrs wagner is now recognized for five minutes i thank you madam chairwoman chair powell uh thank you for joining us uh again today i i just want to start by saying how sick and tired i am of the president's inflation blame game one day it's putin's fault another it's the oil companies and the meat packers or perhaps it's corporate greed um now we're blaming other countries like estonia turkey europe i give you and my my avid assurance that no one in missouri's second congressional district give us a rip what the price of gas and groceries are in europe they care about what they are at the corner of manchester road and weidman no one in this administration is willing to accept responsibility for the dismal economic situation america is in today inflation sir more than tripled in 2021 from 1.4 to 7 percent and from june to the end of september 2021 inflation hovered i think around 5.4 and then began a steady increase until reaching an historic 8.6 percent that is now crippling americans spending power today chair powell when inflation remains steady at 5.4 percent during that period in 2021 what factors played into the fed's decision to keep rates at nearly zero during each fomc meeting in june in july and in september of 2021 sir so during the summer of 2021 uh just giving us hindsight uh inflation was coming down month by month if you look at month monthly readings for cpi or pce they were coming down month on month on month through september and so that that i think uh told us that our thesis that this was going to be a passing inflation shock was was at least plausible i think that the data turned pretty hard in october and november and we very much changed our position and since then have tightened financial conditions quite significantly so it was a matter of a few months when we were we were really looking at this and thinking it's going to be passing most macro economists thought that it would be a passing thing it turned out to not have been so far and so but we saw it move from 1.4 to 5.4 so i don't you know we did have a steady period of time i wouldn't say that it was declining uh but i'm just surprised that we weren't moving more quickly at the fed i mean i want to be honest sir that the fed i think underestimated actual inflation what do you what do you think you missed well we did underestimate it with the benefit of hindsight clearly we did so it comes down to this judgment that we had to make make is really nothing to do with our framework or anything like that it was and every every central bank had to make the same judgment which was looking at the supply chain problems and you know the shock to labor partici labor force participation millions of people out of the labor force we had to decide whether that was going to be a lasting thing or whether it would kind of turn around quickly you know we had very high levels of labor force participation suddenly they're much lower the thought was people will come back as soon as covet is over we have these new vaccines they're going to every american is going to get vaccinated we'll be done with covert by the end of the year so basically these supply-side issues broadly speaking just didn't get better there were recurring waves and that that was the judgment we had to make we knew it could be wrong and i think when it started to look pretty wrong we moved we pivoted now president biden continues seven months ago president biden continues to say that a recession is not inevitable as he his government agencies and dems in congress continue to spend billions and trillions of taxpayer dollars burden businesses with costly rules and regulations and on top of it the president refuses to unleash american energy independence the president's policies continue to take inflation taming options i think off the table and hamstring the fed's ability to focus on price stability president biden not only limits the energy production here in america and spends trillions of our taxpayers money but he also threatens tax increases and promises to cancel billions in debt how can you still say sir that the fed has a pathway to a soft landing for the economy well it uh that's our intention is to achieve inflation getting back to two percent and uh that's all i've laid out a strong labor market i'm sorry with all i've laid out and the increases you're going to have to take so as as i mentioned i think that that path has gotten more and more challenging thanks to you know the effects on oil prices and food prices really and also the supply chains from the from the war in ukraine it was never going we never seen not just the war in ukraine sir well it's the it's the the rise in energy prices and the rise in which has been you know began in february the latest rise from february the latest rise this has been going on for a year and a half i appreciate the chairs indulgence i will yield back the balance of my time thank you chairman powell the gentleman from texas mr greene who is also the chair of the subcommittee on oversight and investigations is now recognized for five minutes thank you madam chair thank you for being here chair powell i greatly appreciate the opportunity to have a few thoughts with you share some thoughts in february of 2021 you indicated that millions of people were out of the labor force which is what you said today millions and with millions of people out of the labor force the biden administration and persons on my side of the aisle sought to do something about that to help those who were unemployed the inflation that my colleagues speak of has to do with unemployment the help that we gave people who were unemployed at the time persons who are unemployed mr chair they need help they can't feed their families small businesses were screaming for help we helped small businesses to get through a turbulent time this was a pandemic the vaccines had to be distributed and developed that's a part of that inflation that they're speaking of people needed rental assistance people were literally going to be evicted by the millions but for the assistance from the biden administration and congress we wanted people to go to work we provided some child care if you want people to go to work schools are closed you got to help people through these turbulent times they never talk about what the inflationary costs that they speak of really did how it benefited american people who were suffering they overlooked that they weren't going to help and now since they didn't help they're going to say everything that they can to demean the help that was given now they didn't vote for it they don't extend the hand of friendship to people in times of need so when they don't do that they have to find a way to denounce the help that was given it's really shameful it's painful and it's sinful to hear people use a term inflation to indicate that people who are unemployed shouldn't have received help the small businesses that were begging for help shouldn't have been helped vaccines shouldn't have been distributed people shouldn't have gotten rental assistance they shouldn't get child care now i i would respect them if they would say these things that these are things that they opposed but they're not going to do that they use one word inflation and unfortunately our messaging to all of the american people has been somewhat lacking but i want the people that i serve who pay attention to the supermarket more so than the stock market to know that when they needed this help we were there for them and mr powell you indicated that there were millions of people out of work in february of last year just prior to this help being accorded people i welcome your commentary i'm sorry i welcome your commentary ah he welcomed my commentary sorry i didn't catch the last part so you know our job is maximum employment and price stability we did we did what we did during the pandemic acute phase and response and you did what you did and now we are where we are and so we have a job to do and uh it's very important that we do it not least because of the people you talk about there the people you talk about are really suffering from inflation now at the grocery store and the only way we can get back to that get back to a place where inflation is low again get inflation back down to two percent and help those people is by trying to get demand and supply back in in let me let me intercede and say this you said uh something that i i find favor with you said we did what we had to do we did what we had to do we did what we had to do we were the adults in the room who did what had to be done others who declined to do can now be critical i yield back thank you very much the gentleman from minnesota mr emmer is now recognized for five minutes thank you chairwoman waters uh thank you for holding this hearing and thank you chair powell for your testimony and your time here today financial freedom is american freedom and frankly americans do not have the financial and economic freedom they need to invest in themselves their businesses and their families unfortunately americans are too busy making ends meet to focus on anything else inflation is running rampant across the united states with consumer prices rising 8.6 percent in the past year the largest price increase since 1981 from fuel to meat to housing my constituents and all americans are suffering at the hands of this hidden tax except it's not so hidden anymore it's punching americans in the face as my friend mr style put it yesterday so how did we get here it's pretty simple we gave up american energy independence we locked down our citizens and businesses for nearly two years pumped the economy with well over five trillion dollars in what's called stimulus funds and now as we recover from the pandemic we simply do not have the energy resources necessary to meet the increased consumer demand there's a history of democrat policies we can point to that put us in this position from refusing to adopt an all-of-the-above energy strategy to recklessly passing two trillion in partisan spending through the american rescue plan despite the fact that nearly one trillion of bipartisan relief was unspent but the bottom line is we need solutions now because inflation is beating up the american people we have to wake up and realize that we cannot continue these spend your way to prosperity policies every day inflation threatens the financial security of american families of our constituents we need solutions let me just return to my point about the spending in december 2020 we'd authorized nearly four trillion dollars in bipartisan coveted relief yet just three months later democrats pushed through another 1.9 trillion dollar with hardly any oversight mechanism included even though a quarter a quarter of all coveted relief remained unspent when president biden was recently asked that the 1.9 trillion spending bill caused inflation he said he didn't think the bill had even a minor impact and called the idea quote bizarre chair powell do you agree with the president's conclusion that the 1.9 trillion dollars american that was included in the american so-called rescue plan and not even a minor impact on the inflation we're seeing today uh i'm sorry i i'm not i wouldn't comment on what any other elected if what any elected official said and it's it's really not up to us to score uh fiscal uh interventions again sir i if you would uh respectfully i'm not asking you to comment on what the president said i'm asking you personally i do you believe that the 1.9 trillion dollar american rescue plan did not even have a minor impact on the inflation we're seeing today we we didn't comment on the tax cuts and jobs act we didn't comment on the cares act and we won't comment on on that act from that it's interesting sir reclaiming it's interesting sir that you won't comment on this but you were more than willing a year ago to talk about inflation as some transitory something that uh everyone has acknowledged now it's going to be here for a while even though it seems like the president's buildback better package this massive spending package is dead on arrival certain elements might not be dead chair powell do you have concerns that if congress injects a new round of stimulus into the current economy it could and in fact will add to the inflation we're seeing today again i'm really it's not our role to give you advice on what to do you know we we we report to congress not the other way around it's we're we're sticking to our our mandate and our mission and and uh we have a lot of work to do on that front and uh not really giving you advice on what you should be doing we take fiscal policy as something that comes to us and we we deal with it as part of everything else i'm very disappointed sir i mean you are supposed to be in charge of the monetary policy of this country you're now embarking on raising interest rates because that's the only tool you think you have left i this is not just a dog chasing its tail anymore sir this is a dog that's starting to devour its tail and it's back end because of the debt that we are carrying i want to thank you you acknowledge we're in a bad spot we're knowingly walking toward an even worse inflation a recession and god forbid food shortages yet we're relying on old monetary policy tools to keep us from falling off a cliff sure we can raise interest rates over and over but the only way to curb in a disaster this bad is to raise interest rates to a catastrophic level or as like larry summers suggested we allow unemployment to go to historical highs it's not feasible we need to put ourselves on a strict spending diet and we have to have strict oversight on the funds that congress has already allocated to make sure not even one single dollar is going to waste and we need to put control back in the hands of small businesses on main street thank you the gentleman from connecticut mr hymes who is also the chair of the subcommittee on national security international development and monetary policy is now recognized for five minutes thank you madam chair and um mr chairman if you'll indulge me one minute um it's important for the american people to understand what's being said here today because it's being said in other rooms in this building what the american people are seeing today is something that my republican party friends have given over to recently all too often and that is rank dishonesty in the service of acquiring and retaining power a party without any resilient or discernible principle has stumbled upon inflation there's inflation all over the world germany japan africa south america the united kingdom there's inflation all over the world but the republican party has decided that inflation is joe biden's fault or the american recovery plan's fault i've read the monetary policy report report from start to finish it gives the russian invasion of ukraine supply chain bottlenecks high fuel costs high wage growth it does not mention joe biden or the american recovery plan by the way the american recovery plan is a particularly rank piece of dishonesty set aside the fact that it cut childhood poverty in half as mr green pointed out if that isn't something to celebrate and to perhaps have the slightest bit of humility as you attack it i don't know i don't know what i can do for you the american recovery plan as mr emmer pointed out was about a third to a quarter of the fiscal efforts that this congress made on a largely bipartisan effort to lift our economy to the point where it is today the chairman said strong and well-recovered unemployment at 3.6 percent so many jobs out there that many of them are growing unfilled did we overshoot maybe we did but the american recovery plan this thing that cut childhood poverty in this country in half was about a quarter to a third of the fiscal efforts the other money was supported by president trump but by the way it's not those dollars that are still sitting in americans bank accounts it's not cares dollars no that was supported by the republican party it's only those dollars in the american recovery plan that cut childhood poverty in half energy prices i read the monetary policy report i'll quote it because of the russian invasion of ukraine oil prices rose sharply i've been around here long enough to know that putting facts and truth out is like spitting into a hurricane but it's important for the american people to understand that mr powell um i released yesterday i hope you got a copy um a white paper on a central bank digital currency it's offered with humility because we have a lot of issues to work out but i hope you've had a chance to take at least a quick look at it i wonder if you have any reflections or importantly what are the next steps now that you've gotten uh commentary from lots of people what's the next steps with respect to the federal reserve thinking about the cbdc so i did have it i printed it out i have it here i have not had a chance to read it carefully obviously given all that's going on but no i so i think generally we're doing a great deal of work the president signed an executive order and administration parts of the administration are working on this i think it's something we really need to explore as a country it should not be a partisan thing it's a very important potential financial innovation that will affect all americans and you know our plan is to work on both the policy side and the technical technological side in coming years and and come to congress with a recommendation at some point and we we don't prejudge what that would be i i know your views are uh very positive on it uh and but and i also i but i think um what uh one thing i did see in your report was the beginnings of thinking about what how congress might authorize it and i do think that's a very very important aspect of this that is great to have congress starting to think about that thank you thank you i think i agree with that and i think that has bipartisan support in my remaining minute i'm going to ask you a question i ask you a lot mr chairman uh we're obviously seeing uh pretty dramatic swings in the financial markets uh money is no longer free we're seeing that in the stock market the high yield market the equity markets cryptocurrency uh in my very short remaining time mr chairman what should we be focused on what is concerning you with respect to systemic risk that may develop in the face of rising rates and rising inflation so you know the the basically the financial markets have been functioning well and the the banking system in particular is very strong well capitalized lots of liquidity better understanding and management of its risks the the the place where there have been issues and we don't see them uh elevated at this point has been illiquidity in some markets relative to where it had been historically but any any markets in particular where were you worried about it liquidity no i wouldn't say that we're you know that we're we're seeing anything that's particularly concerning but uh you know i think sort of systematically liquidity in the treasury market has has come down from where it was and uh we're we've been looking for some time at uh at ways to address that but the markets are clearly clearly functioning reasonably well thank you thank you my time is expired thank you the gentleman from north carolina mr budd is now recognized for five minutes i thank the chair chairman thank you again for being here according to the congressional budget office the federal government will spend an average of 545 billion dollars per year which was the estimate before rates went up and these are on interest payments on the 31 trillion dollars of national debt so that's 545 billion is more than we spend on the department of veterans affairs so given that the national debt is currently at about 125 percent of gdp with the fed's commitment to tackle inflation would that be limited by rising interest rates making the servicing of the national debt even more expensive no absolutely explain that no we are you know we're not in a situation where we need to consider fiscal questions like that the you know the us is on an unsustainable fiscal path meaning that debt is growing faster than the economy but it's not in an unsustainable position we can service our debt and the markets understand that and we we can conduct our policy without without thinking about questions of fiscal sustainability and we do when your colleague secretary yellen was before this committee she told me that federal debt which was then about 105 percent of gdp she said quote that's not a number that i think is fiscally irresponsible she also went on to say quote if interest rates are zero we could substantially have a higher debt burden and in the formula in the following questions she alluded to japan and the fact that it could be about double of where we are now meaning about 60 trillion dollars of debt if you use her math so do you agree with secretary yellen that having a national debt of over 100 of gdp is fiscally responsible given that interest rates can change and that historically low interest rates can't always be expected i guess i would say it this way we we're not on a sustainable path and we haven't been for some time and that means that simply that that's growing faster than the economy by definition that is unsustainable there will become a point there will be a point at which we it becomes a problem of of servicing the debt we're not at that point we're not close to that point but it is we will need to get back uh where revenues and spending are better aligned we don't need to pay the debt down we just need to have the economy growing as fast or faster than the economy over a long period of time we must do that i wouldn't say any particular level there is no level that i can point to that where there's a lot of science behind it being a problem but we know that the path is not sustainable it's interesting that you allude to growth being part of the solution i want to talk about regulation for a minute particularly since the biden administration delayed oil and gas lease sales again this week due to environmental protests so if we pursued policies to increase american energy production by approving more leases and building more pipelines to transfer that energy and cut down on regulatory barriers to make it easier for folks to produce energy and produce anything wouldn't that make a real impact on energy prices and inflation in general without us needing to use the fed to slow the economy with monetary policy to deal with inflation so these questions of the the whole set of questions around energy are are really questions for elected people we don't we don't have a mandate uh there obviously uh um the more supply the the more supply there is the price of something can go down but these are trade-offs that you really have to weigh as elected officials rather i'll narrow it just for a minute do you believe that the vast amount of regulation is an impediment to economic growth i i will say this we we try hard at the fed to weigh the costs and benefits of regulation and we do think it's important to think about it that way because there are there are there are benefits to regulation but there are costs and we don't want we won't don't want the costs to be any higher than they need to be because that does weigh on economic activity yes i mean when you talk about somebody trying to buy a home and now they're questioning it because of the rise in mortgage rates and then i hear for years that the 25 of the cost of a new home is due to regulation at some level so that's the point i'm trying to make is that we need to be very cautious with our regulations because a lot of it's constraining our growth and the growth ultimately which solves this fiscal problem so the point i'm trying to make is that we have much better tools like deregulation which can free up supply rather than just monetary policy and freeing up supply could largely solve the inflation problem for hard-working americans and not send us into a recession so again i thank you for being here and chairwoman i yield back thank you the gentlewoman from iowa mrs axne who is also the vice chair of the subcommittee on housing community development and insurance is now recognized for five minutes thank you chairwoman and uh thank you chair powell for being here it's good to see you uh we've been talking inflation of course we know it's hurting iowa families and families across the country and all of us here have an absolute responsibility to address this and i appreciate the comments of my colleague representative himes because i've sure heard a lot of talk about how bad inflation is from my colleagues over there on the other side of the aisle but i sure haven't heard much about the solutions that they want to provide so i'm here to work on those solutions and i'm glad to have you here to talk with us about that we actually need to reduce inflation and we've got to figure out what's driving it so the san francisco federal reserve bank just put out some research yesterday looking at how much inflation was driven by supply versus demand what they found was that supply factors are responsible for more than half of the current level of inflation and of course i don't need to tell you that while prices increasing are hurting people across a heck of a lot of sectors gas prices have really been driven up over the last few months so chair powell on on gas prices could you talk about some of the supply constraints that have pushed gas and energy prices higher recently sure so um you know two two big things would be just one the the price of oil is set globally and and that's what so we we just take that price and the second second piece of it is the spread that refiners earn so if refinery is at capacity and spreads are high then you have a high spread there and we know that the price of oil went up went up quite a bit started going up early in the year and it's now come down a little bit in the last week or so but those are the two things that have contributed to to the spike in uh in gas prices that we saw we did see uh gas prices moving up but they they really move up moved up quite sharply beginning in in the early parts of this year as the war came into focus thank you so you talked about uh you know a couple of pieces where folks are making more money and you talked about the refining process and that crack spread and i i think they're around 60 right now um so basically what's happening is they're making more money because supply is down so would you agree that increasing the supply of gas could meaningfully lower prices i'd say it's hard to argue with that sure okay well the us hasn't built a major refinery since 1977 so of course as we know this isn't a recent issue it's a long-term lack of investment and so with so many parts of our economy and you actually touched on that earlier now here's the question i'd like to ask you will raising interest rates help increase supply here with fuel and are there other economic tools to do that no we can have no really we can't have any effect on the price of oil or the certainly the supply of energy and you know the the tools are in the hands they're not in our hands okay thank you for pointing that out so i know that the fed absolutely wants to play a role in bringing inflation down but i want to make sure that we are looking at those solutions and trying to understand what better tools we have are there better options out there that you could suggest right here honestly uh you know we're we're an agency with a narrow but important mandate and a set of tools and our focus is on using our tools we think there's a job to do on demand and i i i i don't see us giving advice to congress or or other agencies on how they might use their tools okay well i appreciate that and um hopefully at some other time we can talk a little bit further about that i want to move on uh to housing here as well the in the 2010s we saw less homes built than each the previous four decades and we're more than 5 million homes short of where we should be boy do i see that all over iowa in small towns in particular as well i've talked to businesses that want to expand but they can't do so because there are not enough houses there and so housing is one of the most sensitive areas relative to interest rates so i want to ask the same thing here will raising interest rates help supply there and are there other tools that we should be looking at to do that so i would agree with you there's a there's a problem with uh longer term housing supply and the difficulty of creating adequate housing our what our tools can do is they can you know in the near term and medium term they can restore a better balance between demand and supply in the housing market you've had extraordinarily high housing price increases really across the country over the last couple of years and that's because of a lot of demand and very low rates and you're seeing a housing housing sector slow down to some extent because of higher higher mortgage rates now and so do you have anything that we should be on our radar or that we could be looking to do to assist with this you know i do think that these are these are issues for congress around housing supply if you talk to builders and we we do talk to builders we had a group in last week they they will talk about the longer term issues lack of supply of lots lack of workers lack of uh you know appropriate zoning and things like that i mean these are national issues thank you thank you so much the gentleman from indiana mr hollingsworth is now recognized for five minutes morning it's a pleasure to speak with you again before we get started on my questions i just wanted to comment on representative axne's testimony or conversation or questions i love the fact that she's beginning to recognize how heavy the regulatory burden has been in the refining space that has led to an under investment in the biden war on energy especially on american produced energy continues to bear the fruit that they expected and that is a deep concern for americans that are paying more at the pump we collectively find ourselves in the present situation because we fail to anticipate the future even if that future is inherently uncertain and probabilistic you said a few moments ago we have a job to do on demand i like that and in the recent past and present the policy signals i feel like have been unambiguous for the fed inflation's at a 40-year high the labor market is robust unemployment bouncing along multi-decade lows economic growth has been very high but i worry that that lucidity is a luxury that is fleeting i believe the future will be more ambiguous as we head into a time where economic growth seems to be approximately zero and labor market weakness is beginning to emerge i think those policy signals will be less clear going forward economic growth in q1 was negative albeit for reasons i think you called technical in nature but still negative nonetheless q2 economic growth is currently projected to be approximately zero according to the gdp now tracker and many economists weakness in the labor market while nascent is beginning to emerge still yet inflation as a lagging indicator remains as you put earlier this week very very high i've certainly praised the fed's tardy yet sudden total focus on price stability which will come as you said at the cost of aggregate demand reduction technical reasons are not america will feel aggregate demand reduction where gdp growth is already zero as a recession so i am curious to hear your thought process in an environment where inflation is steadying and or coming down but still yet at multiples of your target and unemployment is escalating quickly and economic growth is negative tell me a little about how you'll think about that environment and approach that from a policy and rate setting perspective and i guess i'd start by saying that that's not the environment we see or expect we actually do think that growth this year in the second half of this year should still be fairly strong it is coming down from the very high reopening levels of last year but uh the first quarter was was somewhat anomalous private spending was was actually very healthy tell me about how you think about that environment i assume that you could be correct but there's a chance you could be incorrect about that soft landing prediction so the way our tools work what we're trying to achieve is is to have a moderation in demand so that supply can catch up and so that that'll take pressure off of off of resource utilization and inflation can come down that's what we're trying to achieve but inflation will come down after that fact demand will come down first inflation will lag that where inflation remains that's right multiples of your target but unemployment because of that sagging demand goes up economic growth is depressed because of that sagging demand tell me how you'll think about that environment so that the way we think about it from a policy standpoint is we're of course we raise interest rates and shrink the balance sheet that affects broad financial conditions and that affects the economy so what the question will be asking is is you know is our policy rate that's the thing we control is it at the right level so that it's affecting financial conditions in the economy in the way that we need an intent i want to know how you will intend to affect them where unemployment is going up and economic growth is negative but inflation remains high i i think you would i mean in that hypothetical situation i think you would say that that that would be a setting in which inflation could be expected to come down we've as i've said we'd like to see inflation coming down as well so the question is you've got you could move rates down or steady rate escalations in advance of inflation hitting your target as long as you saw it beginning to come down if economic conditions or your other mandate full employment begin to show weakness as one of my colleagues used to say at every meeting it's it's the same question do you raise leave them the same or bring them down right right so i think you know once i i think uh we'd have to see what's happening we'll try to make good judgments in real time right but the main thing is we can't fail on this we really have to get inflation down to two percent so we're going to want to see evidence that it really is coming down before we declare any kind of victory and so i think we'd be reluctant to cut well this will have real cost to americans so i want to make sure that we're forward thinking about what is going on in the real economy not just watching a lagging indicator that is inflation and with that i'll yield back thank you the gentleman from new jersey mr gothheimer who's also the vice chair of the subcommittee national security international development and monetary policy is now recognized for five minutes thank you madam chairwoman uh mr chairman the most recent consumer price index report indicated that the largest component of the cpi shelter owned and rented but owned and rented has increased 5.5 since last year estimates i've seen show apartment rental cost of 15 or more over the last year do you believe the cpi measure of shelter costs understates the actual increase in housing costs and and do you have any suggestions for actions congress can take to lower housing costs for americans in the short and long term there's some sense in which it might understate costs because it's it's not capturing uh leases that are uh that haven't turned over yet right so it's it's really looking at leases that are turning over so so probably it's a higher rate i you know overall we think it's a decent a decent measure uh it also remember that in the cpi housing services has a weight that's double in the measure that we we we look at uh personal consumption expenditure inflation we think that's a better more sophisticated a better representation of the inflation that's actually happening in people's lives so we would tend to look at that thank you chairman i do want to shift to another issue that's covered in your june report i've been engaged in discussions on cryptocurrency policy and have long warned that a run on stablecoin has the potential to stabilize financial markets my concerns were realized in part last month when the so-called stablecoin terror collapsed your report highlighted the danger of that event and called for congressional action to protect consumers and financial markets my draft legislation the stablecoin innovation and protection act would establish a definition of requirements for qualified stablecoin and defined as cryptocurrencies redeemable one-to-one for us dollars this legislation would reduce financial instability in the markets and protect consumers and support innovation in fintech would create also a pathway for banks and non-banks to acquire qualified status stable coins they issue with federal oversight do you believe non-bank entities can be reliable issuers of qualified stable coins if they can prove they are fully backed by cash or cash equivalents so as you know we've recommended that congress look at this and there are many many approaches including yours you know the president's working group did recommend it that that stable coins be issued by insured depository institutions i i think it's great that congress is looking at different approaches and and evaluating those questions what you really want though is you want to be sure that those entities are appropriately regulated and in our view in some sense at the federal level so um but i i think it's uh that's going to be a question for congress you know what the pwg came up with but i think they're different approaches do you have any views on who the primary regulator should be at all you think that's all up to congress like would the occ i think approach a problem with the occ being a primary regulator you know for for national bank charters yes but i mean there the thing is stable coins are used now principally in in the capital markets as you know uh around the platforms that you know the digital finance platforms and that's more in the daily look of the sec if there were going to be payment stable coins you know we should be involved and if it's going to it's going to be about banks getting involved it'll be the banking regulator so i think it's it's going to be we're blessed by you know a plethora of uh regulatory agencies in the financial sector so that'll need to be sorted out do you think that's something given the challenges we've had in the last months that's something we have to move quickly on are you concerned with how long it's taking congress to actually act there i i think it's very important it's no different than any other big technological innovation you know airplanes for example there there comes a point at which a new regulatory framework is needed to protect the public and create you know fair preserve innovation and competition support all that but that's that time is coming for digital finance and i'm i i think uh i i i'm encouraged that they're now a bunch of bills and and you know proposals and that congress is working on this i think it's important that it get done you know quickly because as we've seen these companies can grow really quickly and um we can also we've also seen that they can they can have reverses as well and and you think overall you the the ideal role of the fed in overseeing stable coins is what what ultimately you think long term what's the role of the fed well i you know so the one question is around cbdc's right is is if do we want a private stablecoin to to wind up being the digital dollar and i think the answer is no if we're going to have a digital dollar it should be done by us we don't know that we need a digital dollar as such yet but i think that that it should be it should be you know government guaranteed money not private money that is really created for the benefit of the of the private issuer so that's one thing i think also we're uh very important in payments so anything to do with with with payments that the public is involved in we should be involved in that too thank you so much i yield back thank you thank you very much the gentleman from tennessee mr rose is now recognized for five minutes thank you chairwoman waters and ranking member mchenry for holding the hearing today and thank you chair powell for for being here with us a few moments ago mr hymes noted that the american recovery plan i think he meant american rescue plan is not mentioned in the monetary policy report chair powell is it federal reserve practice to comment on bills passed by congress in the monetary policy report no um turning to a question that we've obviously talked a lot about today already you have inflation and rising prices on things like food and fuel are having a devastating impact on people all across middle tennessee and indeed across the country you have told us that you will not comment on fiscal policy but you have also previously urged congress to support fiscal spending some of which caused this inflation in my view democrats are still pushing a reckless spending proposal although reports are that it will be smaller than the one they tried to ram through congress late last year so chair powell will you commit to pushing back as strongly against reckless spending proposals that would exacerbate the current inflation as much as you push congress to support more fiscal spending during the pandemic so i i did i didn't support any particular bill but i did say that there was more to be done and and i by the way i completely ended that practice uh at the end of 20 and 20. uh 20 or 21. anyway 20 2020. i stopped i completely stopped doing talking about that publicly at all and the reason i did it before was first of all i was being encouraged by leadership on both sides of the hill and both in both parties they were they were asking me for ideas don't you think we need to do something more can you help us that kind of thing but that's all done that's over with and i i i'm not i the fed should not play or seek to play a role in fiscal policy we have our own mandate we sure need to stick to that now would in in light of that statement would you agree with this statement that the analysis that the fed had through much of last year and that the administration to some extent continues to advance uh that that with the with respect to inflation and the policy prescriptions has proven to be far more transitory than the inflation itself well if i understand your question the the um you know we we did think that these were going to be passing forces we thought that these shocks that were hitting supply-side shocks we thought they would be like oil shocks have been where they come and go and other supply side shocks commodity shocks of various kinds as the course of of 2021 went on it became increasingly clear particularly uh in the fall that that wasn't going to be the case we weren't going to see that kind of progress and we pivoted you know seven months ago now we pivoted to to to address this with our policy tools i i think our judgment in real time proved to be incorrect but we it was it was not an irrational judgment and it was one that was very widely held at the time by you know by other central banks and economists generally and it was but it wasn't about economics it was how long is this going to last are these things that are happening to our economy which are unprecedented are they going to get better like for example millions of people dropping out of the labor force or you know the the problems we have with the global supply chains there was no there was no model of that we can't look at the last 20 times it happened so that's you know for sure in hindsight it was it was not transitory thank you the committee for a responsible federal budget estimated that canceling federal student loan debt held by americans could increase the inflation rate as much as a half a percentage point and would add 1.6 trillion to the national debt this estimate notably also did not incorporate the possible effect that student loan suited student debt cancellation would have on increased college tuition prices chair powell has the fed done any analysis on the inflationary impact of these proposals to forgive student loans being actively considered by congressional democrats in the administration not that i know of you know we would look to cbo and um legislation we we tend to start to put it in our in our our models of the economy when we think there's really really likely likely going to be legislation generally though would you expect for giving 1.6 trillion in debt whether it's student loan debt or credit card debt to have an inflationary impact well i again i'm gonna we're gonna leave that to cbo to score and also the congressional the um office of management budget we we just routinely just do not score proposed congressional proposals it would get us involved in political things and you know why would we be independent then so we would to be independent we need to be out of these very difficult fiscal issues which which are really your job thank you chair pal i yield back thank you the gentlewoman from massachusetts ms presley is now recognized for five minutes thank you madam chair chairman powell without question the fed has a role to play in healing our economy but as with any treatment the wrong medication can cause even more harm and make the patient more ill chairman powell at your latest press conference you stated quote wages are not principally responsible for the inflation we are seeing end quote i certainly agree with that assessment as to many economists considering what that wages are not driving inflation why is the fed addressing inflation with tools which primarily impact wages such as interest rates well our tools principally impact inflation not not necessarily wage inflation um so our job is price inflation but i will say on on wage inflation the issue is that over time wages are really a very important over time looking forward are very important particularly for service companies where most of the costs are are really in in wages and wages we all love to see big wage increases but these increases that we were having have been having some of them are just substantially bigger than would be consistent with two percent inflation thank you um well throughout today's a hearing uh to that point you've indicated that the fed doesn't have a more precise tools at your disposal chairman the root causes of the inflation we are seeing are supply chain disruptions outside of the fed's control whether it's copen 19 lockdowns in china or the russia ukraine war which is why this knee-jerk responds to raise interest rates is so alarming the fed cannot control the factors causing inflation but this policy choice would plunge millions of people back into unemployment dampen wage growth and tip the economy into a recession there's an old adage chairman pal if all you have is a hammer everything looks like a nail you've recently said that the fed's tools like interest rates and the balance sheet are famously blunt and lack precision so in that case do you agree that the fed needs new tools that are more precise to better fulfill its statutory mandate of price stability and to maximize employment um no i don't think we're looking for new tools i i would just say that a big part of the inflation that's happening is is really not going to be affected by tools but a big part of it is going to be infected by our tools and that's the part that's related to demand mr chairman but by your own account you stated on the record that the fed's current tools are ill-suited to deal with the inflation we are saying so perhaps now is the time to expand the fed's toolkit to meet the unique moment that we find ourselves in for example one tool that could help the fed tailor a more precise response to inflation is direct credit regulation this would allow the fed to regulate the availability of credit in the specific sectors of the economy experiencing high inflation without impacting other sectors would you support congress passing legislation to give the fed more precise tools to tackle inflation such as this idea that's that's not a that's not something we would we would seek of course it's up to congress to to make those decisions though but you're your own admission your tools are too blunt and not precise enough so what additional tools do you believe the fed needs to respond more precisely to inflation well again we're our tools are are they're blunt but they are the right tools to deal with with broad aggregate demand and that is that is a that is a more important determinant of inflation than energy and food prices as painful as energy and food prices are the bigger piece of it is is is related to demand we can't help with energy and food prices to your point but we can help with aggregate demand and we do that through the tools we have we're not seeking a deeper involvement in the economy like you're talking about but again that's a question for congress congress can can change our toolkit or our mandate well you know in this moment of overlapping crises from supply chain disruptions to high inflation i do believe we need precise policies that respond to the needs of the american people the fed knows that raising interest rates will not address the root causes of rising prices but they will just keep doing so even at the cost of millions of working class people's livelihoods we need a more sophisticated for the era we are in to truly heal our economy and tackle inflation responsibly thank you are you thank you uh the gentleman from wisconsin's mr style is now recognized for five minutes thank you madam chairwoman thank you for being here chair powell appreciate it uh just a point of clarification you noted that you ended uh your public statements in support of fiscal stimulus by the end of 2020 is that correct yes and so it'd be after that that the democrats under one party control past 1.9 trillion dollars of additional fiscal stimulus after you it already stopped making public statements in support of additional fiscal stimulus i have the timeline correct yeah i mean i i again i'm not asking you to open it i just want to make sure i had the timeline i i took no position publicly or privately and neither should the fed chair do so understood but your public statements in support of additional fiscal stimulus ended in 2020 democrats under one party control passed 1.9 trillion dollars of fiscal stimulus after that period of time i just want to make sure the timeline i understand let me let me cognizant of the time we have and you've noted that you think the fed should not play a role in fiscal policy i have grave concerns of the fiscal policy that we've seen playing out in washington not asking you to opine on that looking at 2021 we saw fiscal we saw real gdp growth uh about 5.6 percent in that year is that correct yes over over five percent a reasonably robust rate in at that period of time uh in the year of uh 2021 we saw the fed's balance sheet increase uh by about 1.5 trillion dollars is that correct sounds about right so if the period of time where we were seeing reasonably robust economic growth the federal reserve was continuing to build its balance sheet to a tune of 1.5 trillion dollars and so during the year 2021 the federal reserve ultimately purchased about 54 of all federal debt issued by the treasury is that accurate i don't i don't know that if you if you have the number in front of you i i have the number in front of me i think it's worth roughly roughly half of the federal debt that was issued in 2021 was acquired by the fed and placed on the federal reserve's balance sheet my concern is that that hid the real cost of borrowing borrowing that was being driven by the biden administration at that time and my concern is that the federal reserve by increasing their balance sheet by 1.5 trillion dollars at a period of time when democrats put forward a gigantic stimulus package after you had stopped your public calls for requesting additional fiscal stimulus that that's all part of the problem it's both the fiscal policy and the monetary policy coming together but let me keep going here for a moment we paid in we the federal government paid in debt payments last year 580 billion dollars is that correct i don't know that's that's the numbers i have it's about 5.8 percent of our budget fiscal side and the projections of cbo interest over the next decade one of the one of the the cbo projects it will triple to 1.2 trillion dollars but that's assuming that's assuming federal debt remains in a range of 2.4 percent to 3.8 percent that's the cbo's projections to get to debt payments increasing to 1.2 trillion by the end of the decade but we're sitting here at a period of time when the 10-year treasury yield has crossed 3 3.16 percent i believe as of yesterday a year ago that was 1.48 so we're already approaching the high interest rate threshold that cbo has for interest on the debt to triple do you project that interest payments on the debt the interest payment number that's impacted by the interest rate set by the fed will remain in a range of 2.4 to 3.8 percent or do you believe that it will dramatically be above that we don't we know published projections on on treasury rates so you as you move as is interest rates are moving as you're doing that i think appropriately so to address the inflation environment that we're in the federal reserve doesn't project project the cost on the debt moving forward in internally we don't publish as what i said but internally we of course do have a we we have a path for the for the tenure for example and for many many years it's always showed rates returning to rates to levels even where we are or even higher well that's what goes into our models because we assume over time for example we're reversing you know we're going to be shrinking our balance sheet by in the range of a trillion dollars a year in coming years so that'll put more supply out that should put some upward pressure on rates um so we we do it's it's not our business to project this publicly but that our assumptions are that rates will return to levels that are somewhat higher well let me let me for the record state that i'm very concerned that we're going to see interest rates remain high the the committee for a responsible federal budget notes that a 50 50 basis points is 143 billion dollars a year in debt i'm concerned that we're on a path that's very unstable appreciate you being here madam chairwoman i'll yield back thank you the gentlewoman from new york ms ocasio-cortez is now recognized for five minutes thank you so much madam chair um and and thank you chairman for coming in to speak with us today a chair powell in the summer of 2019 which admittedly was a different world during a financial services committee hearing you relayed to me that quote i would look at today's unemployment as well within the range of plausible estimates of what the natural rate of unemployment is do you recall what the unemployment rate was around that time in 2019 i want to say three and a half percent yes it was 3.5 and what is the uh current unemployment rate today 3.6 3.6 you also said quote when unemployment went way up you didn't see inflation go way down so you don't see inflation reacting to unemployment the way it does because inflation seems very anchored again that was at that time uh chair powell would you say that some you know briefly yes or no but would you say that some of the contributing factors to today's inflation include ongoing supply chain issues including volatility of commodity prices as a result of the ongoing conflict in ukraine and companies also raising prices because they can well i i would say on supply side issues for sure those are playing an important role and am i correct that american workers wages wage gains have actually trailed inflation in other words while the cost of goods went up by 8.6 on average wages did not increase by that much it depends uh for some people to lower end of the spectrum actually have been getting positive real wage gains for most of most people though inflation has been higher than their wage increase so on average we have a wage growth at about 6.1 percent so average wages are trailing inflation um it does seem that american workers are not primarily responsible for the inflationary issues that we're seeing today but despite this we are seeing some comments from individuals like former u.s treasury secretary lawrence summers earlier this year said that in order to contain inflation the u.s needs five years of unemployment above five percent or one year of 10 unemployment do you agree with that assessment so i understand how that number can be arrived at or derived but i think there's so much uncertainty and in particular the um that the answer is going to depend to a significant extent on what happens on the supply side if we if we do get these supply side problems uh worked out which i think is certainly going to happen in time then then uh then then you wouldn't see anything like that but it's a highly uncertain time and um our our intention of course is to is to bring down inflation while keeping the labor market strong i think it's important to drive home what a 10 sustained unemployment unemployment would look like in this country for context we didn't even reach 10 during the great recession uh we did experience 10 unemployment in 1982 following the volcker shock um but in this market to get to 10 unemployment that would require about 10.5 million additional people out of work and historically we know that black unemployment is usually double that of white unemployment correct yes it tends to move at twice the speed both up and down but certainly moving up so when the former treasury secretary says he wants 10 unemployment overall um he's also saying that we need black unemployment of nearly 20 or implies that um but chair powell i do think that despite the tools that you may that you don't have congress does have tools as well would you say that the following actions granted in the scope of congress could be deployed to impact inflation um using antitrust laws against companies that are raising uh prices using their market power sorry i didn't i didn't hear the last part would this action uh would using antitrust laws against companies that are raising their prices uh have an inflation impact on inflation antitrust any trust laws ah okay sorry acoustics in here no worries would that have an inflationary um it's hard to say really would subjecting those companies to a windfall profits tax have a potential impact on inflation again i don't i and would requiring government contractors to keep a lid on their pricing have certain impacts on inflation you know there's a long history of price controls when inflation has been high and it was it was not a successful one really really it comes down to getting demand and supply in alignment and uh if the ted if the fed's tools mostly impact demand um but most of those inflationary issues could be potentially impacted by supply how high do you think the fed would actually have to drive unemployment to actually have an impact well that's that's going to depend on a lot of things and um you know ideally we we can raise rates and uh it's very important that we get inflation back down particularly for people in the margins of society who are suffering the most from inflation and maybe a longer conversation thank you thank you very much the gentleman from south carolina mr timmins is now recognized for five minutes thank you madam chair and thank you chairman pal for being with us today uh congratulations on being confirmed uh to your second term as chair we've got some rocky uh times ahead wish you luck last time you were here we talked we discussed how rising interest rates really inflates debt servicing costs for the federal government and i know what you're going to say that's a concern for fiscal policy makers the congress to take into account not the fed and that is mostly true but i still think it's worth everyone being fully aware of just how costly servicing our debt will be now that interest rates are returning to historically normal levels according to cbo interest payments on the debt are the fastest growing part of the federal budget cbo projects that servicing our debt will cost taxpayers 8.1 trillion dollars of the 10-year budget window 8.1 trillion and their inflation assumptions are projected interest rates are fairly lower than current levels and quite a bit lower than where rates are likely headed to get inflation under control and i thank you for your efforts to get inflation under control but for every half percentage point rate rate hike that is an estimated 133 billion of annual increases i'm going to say that again 133 billion in annual increase in debt servicing costs that is just a staggering amount of money so we congress must get our fiscal house in order we have to there is no other option the the dollar's position in the world is the global reserve currency is solid and there are no immediate signs of that changing but if we continue on our current trajectory that will not always be a given so my question is are you worried that if our current fiscal path continues which i should note with each rate hike it looks worse and worse that the dollar's position in the world could be challenged in the long term is that a concern certainly in the long term um the you know the dollar is the reserve currency and um i don't see it as particularly under threat at the moment given given the advantages that we have which are many but you're right the the u.s federal budget is on an unsustainable path and we will have to deal with it the sooner the better and unsustainable just means that the debt is growing faster than the economy which by definition over time can't be sustained thank you for the record i also want to follow up you stated the following is congress considered the biden stimulus quote in addition workers and households who struggle to find their place in the post-pandemic economy are likely to need continued support the same is true for many small businesses that are likely to prosper again once the pandemic is behind us that was from your speech on february 10 of 2021 i just wanted to add that in for the record one final question during a meeting last week at the international association of insurance supervisors the aia continued issued a consultation paper on comparability criteria looking at the use of international capital standard versus the aggregation method as you know the u.s has committed to using an aggregation-like approach here in the u.s through the national association of insurance commissioner commissioners group capital calculation and the fed's proposed building block approach moreover the eu and the uk through their covered agreements with the u.s recognized these approaches uh to cap to group capital nevertheless insurance europe a federation of european insurers representing more than 95 of the european market takes the view that there cannot be two versions of an international capital standard so my question is this will you continue to advocate and support the aggregation method as an alternative to the international capital standard so i think we're i i am i'm a little rusty on that but i will say this i know that we're strongly committed to capital standards that work for u.s insurance companies i get that but i guess what i'm getting at is we have a different way of regulating insurance here in the u.s we all know that and it works for us and we do not need to let these international bodies change our way of doing things we need you to stand up for the american way of doing things and for american businesses can you commit to doing that so i think that that's i think that's what we're doing so okay yes thank you madam chair yield back thank you the gentleman from massachusetts mr arkham cloth is now recognized for five minutes you madam chair uh welcome chairman i want to start by asking you about inflation expectations which as you obviously well know can be very difficult to dislodge once they are anchored in the mindset of consumers and what the fed can do both to address inflation but also to convince americans that inflation is going to be lowering in the medium term and thereby prevent inflation expectations from getting anchored well so if you look at inflation expectations and we of course we measure professional forecasters households market-based break-evens and things like that a broad range of things you do see that people expect inflation to be high in the very near term but they expect it to come down fairly quickly and get back to so so generally as a general matter the evidence is clear that people do expect inflation to come back down to levels that are consistent with our price stability mandate but this is the first we haven't had a test like this i would say we haven't had an extended period of high inflation for a long time and so it's not a comfortable place to be we short-term inflation expectations are higher and it does add uh you know it adds to our desire to move expeditiously and with force to to get uh to get rates up and then and ultimately to get inflation down so building on that one degree removed the only thing more painful than expected high inflation is unexpected high inflation and it makes it the degree to which businesses and consumers do not have confidence in the fed's ability to control inflation or the us government at large makes it harder for them to make capital investments in the long term makes it harder to do wage negotiations is there a measure of the degree of confidence that both business and consumers have in the in the ability of inflation to remain low that you are tracking so that we can try to measure the degree of confidence people have in in not having to to see unexpected inflation in the future so first i agree with that ultimately this is uh the point is that if the public retains confidence that inflation will come down if their expectations remain anchored then it will come down that that is that is we think that's how fulfilling right so by many many measures we we track them all i mean we track we put them all in one big measure called the index of common inflation expectations we do that and we publish that at various times and they strikes me basically that message that that essentially yes inflation expectations are anchored but as i said that that's that's that's good but it's not enough we need to get inflation down because inevitably over time these expectations are going to be under pressure are you able to track the seems like you also want to track volatility within that only within that index of inflation expectations to see how much confidence people have that they're not going to see unexpected inflation yes yes we look at the we look at the distribution and you know there are some there's some small signs concerning signs and you know we just can't allow that we we really have to ultimately our whole framework is about keeping inflation expectations well and truly anchored so that inflation will return to that anchor and your credibility in that is is auto catalytic in in inflation expectations so i think it's critical that the businesses and consumers have that confidence absolutely how can you explain how quantitative tightening i guess we would call it now is going to play into that unrolling quantitative easing of the last 10 years sure so it's quantitative easing in reverse so what quantitative easing does is it it reduces the supply of risk-free longer-term assets and that tends to drive rates down as people want those and when we when we when we loosen our balance sheet sorry when we when we shrink our balance sheet what happens is the public will be holding more of that paper and we won't be holding it and that should have some upward pressure over time markets are forward-looking so they're already pricing this in and you don't project any changes in how you're going to do qt so we you know we put out a plan we thought very carefully about it we've announced it markets have seen it and it's it's sort of priced in and i think you know we would intend to keep to that plan of course one of our principles is that we're always going to be flexible if if if that's warranted last question for you in the final 30 seconds here chairman can you give us an update on fed now and your plans for access both to establish banks as well as to financial technology companies so fed now is supposed to go live next year we believe we're on track to do that we've got people working really hard on it for some time i didn't catch the last part of the question how are you going to how are you going to make access available is it going to be just for certain types of banks is going to be for financial technology companies how are you going to adjudicate access so that's that's something we're looking at we are you know we're i mean mainly it's for the for the broad sweep of banks and we'll have to look at going beyond that i yield back thank you the gentleman from south carolina mr norman is now recognized for five minutes thank you uh chairwoman waters uh chairman welcome glad to have you here would you agree that housing is a leading economic indicator on the health of the economy or on the direction the economy is going it's it's certainly an important indicator because it affects so many different facets of the economy because it affects so many facets of the economy is that right i'm sorry having a hard time hearing because it affects so many facets of the economy in other words when you housing whether it's commercial residential you buy a lot of products that uh are across the spectrum it's an important very important sector of the economy for the reasons you point out and one of the reasons that most economists are predicting a severe recession is uh housing as a leading economic indicator i've done that that's what i've made my living do you realize it's very simple to solve to get the housing at john at a point that it used that it was under the previous administration i'm from south carolina people are moving there do you realize in the last uh probably four months uh it's been a severe cut back despite the fact that people are coming in and need it and it's because of this administration's war on energy and natural gas this the fed can't regulate that putin can't regulate that uh it's a direct result of policies of this administration um and one of the reasons that it's basically going to come to a standstill the war on energy you can't get afford gas for your for your product uh it's a war on the workforce that this this administration has done when you pay people not to work it's kind of a disincentive to go to work um supply chain that has been mentioned um when the call i got uh four days ago a leading producer of chicken cannot get corn to feed the popes the young chickens is kind of a problem uh interest rates which is uh at your disposal uh is severely going to affect the housing industry when you're paying a six percent long-term uh mortgage rate uh along with every other cost increase directly caused by the policies of this administration the housing is going to come to a start a stopping point as it is as it is now likely to have um regulations have been mentioned here uh we now face on simple projects a regulations and i would point out many of them needless to be 35 38 uh that's when you combine all of these things housing is going to take a tremendous drop that will affect the economy wouldn't you say i think all of those things are affecting the economy is greed that has been mentioned here a leading cause of inflation i i think it's a macroeconomic phenomenon that's caused by the by the things we've been talking about was greed not a factor uh four years ago i you know i mean if it's a factor now were they just less greedy in 16 through 20. it's hard to see why there would have been right and did putin was he responsible for the low gas prices that we experienced from 16 and 20. not as far as i know i don't think he had much impact if he did uh it'd be a sad state for the for the united states um you know i think um one of the congressman mentioned about the debt the um debt relief of college students that's been proposed by this amendment the current administration how will that have an effect on the economy and i think the number that's been talked about to forgive 50 000 per student will that affect the inflation in the economy you know as i mentioned we don't we don't score these bills from an inflation standpoint it wouldn't be positive though would it sorry i doubt it would be positive would it well i don't know i mean that's that's for that's for elected folks all right and on the central bank digital currency would you have to have approval from congress before the federal reserve got involved i can't imagine that we would move forward without authorizing legislation you'd have to have the approval of congress yes um well thank you for what you're doing you're using the tools that you you have at your disposal most of this can be eliminated if we had a policy now that was pro-business pro-growth and but thanks for what you're doing and congratulations on being reappointed as chairman thank you thank you the gentleman from california mr vargas is now recognized for five minutes uh thank you very i'm over here mr chairman thank you very much madam chair and ranking member mr chairman thank you very much for being here and congratulations i think i'm not sure you're running into a pretty heavy lift here going forward but very much i appreciate you being here today i believe that inflation is real obviously and it's hurting a lot of people it's the causes i think that are being manipulated and frankly lied about and there's one big criticism that i make of you and also and especially i guess secretary yeltsin and that is that you haven't explained inflation within the context of the world environment what's happening globally my good friends on the other side of the aisle love to blame inflation singularly on president biden and his policies i didn't get a chance to ask secretary ellen any questions when he was she was here last time kind of low on the totem pole here but i wanted to scream because every time she led with her chin as opposed to explaining that this inflation is globally but now that i have you here i get to ask you some questions what is the inflation rate in the european union overall i want to i don't i wouldn't it's 8.8 according to statistica did they receive any money from the american rescue plan uh not to my knowledge what is the inflation rate in estonia in estonia i don't know i mean they're roughly comparable to ours it's 20.1 percent it's not very comparable to ours it's over three times higher than european democracy did they receive any money from the american rescue plan not to my knowledge how about latvia what is the inflation rate in latvia no idea it's 16.8 percent did they receive any money from biden or the american rescue plan not as far as i know how about bulgaria 13.4 i knew that one poll what you knew that one no i apologize i'll let you try with poland how about that their friendly nation 12.8 did they receive any money from the american rescue plant or and if they didn't why do they have inflation that's so high not as far as i know so why is their inflation rate so high well if in in europe the inflation that they're seeing is principally i believe due to um energy and food energy prices and food prices it's due to the war and it's due to you know the situation with russia being their principal energy supplier so not the american rest they didn't receive any money though from the american rescue plan not as far as i know okay let's keep going romania 12.4 slovakia 11.8 hungary 10.8 croatia 10.7 greece 10.5 the netherlands come on we're gonna know the netherlands since they were going down so be lower 10.2 see but you do see that the i'm glad this is going germany how about let's skip to germany very similar to us i'm not going to guess 8.7 and the reason i wanted to go through the litany of these things i keep hearing from my good friends on the other side of the aisle that inflation inflation somehow magically exists because of biden's policies because of the american rescue plan well if that's true then there shouldn't be this other inflation in other countries it's a global phenomena as clinton used to say it's the economy stupid here it's the pandemic obviously and things that happen we have a situation around the whole world yet you don't explain it globally and i shouldn't tell you because i really like you a lot and i really do think you're doing a good job trying very hard but i did want to yell it yes you because she didn't explain anything globally shouldn't don't you think you have a responsibility the american people i know in my district most people believe that inflation's only happening here because of the rhetoric that they hear on the other side and you guys i think have the opportunity and the responsibility to give them the full picture not this limited picture and i hope you do so again with that uh i'll yield back thank you very much madam chair gentlemen yields back the gentleman from oklahoma mr lucas is now recognized for five minutes thank you madam chair and actually i think my timing for my question is perfect chairman powell i'd like to discuss with you today an issue that is of significant concern to me and many of my colleagues the sec's regulatory agenda has more than 50 significant proposals that are currently underway or approaching a final vote these rules cut across every asset class under the sec the securities exchange commission's jurisdiction the sheer complexity and volume of these overlapping rule makings could negatively impact markets and the public that depends on them sec commissioner hester pierce purse i should say warned that the speed and character of these rule makings could create dangerous conditions in our capital markets now this is against the backdrop of the u.s economy facing significant challenges we've discussed that all morning inflation at more than a 40-year high with substantial increases in the cost of food housing and gas prices at record prices also supply chain backlogs and labor shortages continue to weigh on the economy with consumer and business confidence plummeting and of course we're still studying the impact of the global pandemic and the consequences of the ongoing russian invasion of the ukraine in oklahoma small businesses farmers ranchers are navigating through surging energy prices and volatile agricultural markets for inputs like grain and fertilizer poor crop conditions and high commodity prices are expected the worst in the situations throughout the summer and into the rest of the year in uncertain times like this market participants need to seek to protect their retirement savings to hedge risk and to safeguard their livelihoods a top priority should be supporting liquid markets to protect the us economy from the face of these substantial headwinds i know you don't comment on other entities within the federal government i know these regulations that are going to have such a tremendous impact are not coming from your area but unfortunately i'm concerned the magnitude and the significance of rule-making proposals coming out at sec in such a short amount of time runs counter to the goal we know that regulatory uncertainty creates adverse market environment for economic growth and market stability so chairman powell i'll not ask you to comment on the sec but could you speak to the importance of market liquidity during periods of economic uncertainty yes so markets are there to one of the things they do is process information and consider the implications of it and and it's critical that markets be liquid enough to do that and if that happens then financial condition conditions can adjust and equity prices of various kinds can adjust and that's that's one of their big functions is to do do that to absorb news uh sometimes very difficult news in a way that is that is that preserves stability i think congress and the public should have the opportunity to fully grasp the impact of the sec sweeping proposals if we really want to tame inflation if we re if we should we should begin to by not making the current situation worse the sec's approach will rattle markets during a time when strong capital markets are essential to our economic growth and our constituents back home after all you're working hard on the demand side of the equation but we in congress and the administration should help with the supply side of the equation and that is not making it more difficult to invest in and create more goods and services in this country that said chairman powell as you've acknowledged the fed's monetary policy tools can do very little to mitigate rising gas prices however the increased cost of gas has an oversized impact on consumer inflation expectations folks see the price of the pump going up and experience the price per gallon at an all-time high could you discuss how the fed envisions its ability to rein in inflation expectations driven in large part by gas prices or put another way if gas prices remain at record levels is an aggressive response from the fed all but guaranteed well if grass prices remain at the current levels they're at then inflation you know it's the problem is inflation means continuing to go up so it isn't so much the level as the as the rate of change as you as you know so um i i think we are mindful that even though these things are outside of our control the gas prices and food prices for the most part that just that adds a little bit of urgency in our wanting to get our our rates into a place where where we're addressing inflation directly because the public reacts to all kinds of inflation not just core inflation our tools tend to generally go to core inflation so um but and we we don't think we can use our tools to change energy prices but we do think that they that they add they add uh to our desire to get expeditiously to the appropriate levels and clearly congress and the administration the majority has a responsibility to increase supplies of resources not discourage that yield back madam chair thank you mr chairman gentleman's time has expired the gentlewoman from ohio miss lady who is also the chair of the subcommittee on diversity inclusion is now recognized for five minutes uh thank you so much madam chair and thank you chair powell for being here as you're navigating uh through all these federal issues during this difficult economic time uh chair pal uh after our hearing concludes this committee will be voting on a few pieces of legislation so i'm going to take advantage of having you here to shed some light on a few of the things that we will be considering i can't think of a better person to give us some insight on these issues first question is we'll be voting on an amendment that would delay the sec small business advocate advocate from conducting outreach to underserved business owners until after gas prices drop to the pre-covid level chuck allen in your opinion will delaying the sec's outreach to minority business owners affect gas prices in any way i'm uh with all respect uh i i'm reluctant to comment on on proposed legislation well let me answer this let's say if there's not legislation is there a correlation between what gas prices would uh be in relation to what they were with pre uh pre-covet with inflation again i you know i'd be expressing an opinion on someone's amendment and i i just i i if i start down that road i don't know where it stops i really uh these are matters for elected people well would you say that the global uh markets and uh inflation is across the country that we're seeing this everywhere yes inflation inflation is is happening everywhere now i'm dealing with a lot of fair housing issues in in my district and you know i have a long history of of working with public housing and relocating people and as we look at issues with housing do you think housing is any way uh tied to uh inflation i'm sorry i didn't catch the question i apologize do you think what's happening in our housing market is tied to uh inflation in any way yes it is yes so housing costs are about a third of the cpi housing we call them housing services and that's really rents plus uh the way the way it works is uh uh we in effect an owner of a house is uh is charging something called owner's equivalent rent or paying something called owner's equivalent rent so yes it's an important factor in inflation okay so can can you tell us in in your opinion in light of congressman vargas's question is as he was giving us an idea of as some of our colleagues are trying to tie things to uh the american uh rescue plan uh they're trying to tie it to us taking care of the least of us that that if if if it is tied to inflation why in other areas or countries uh that and they don't have the american rescue plan and how do you answer more about mr vargas's question i mean i know he gave you a litany i'm not trying to put you on the spot with quizzing you on what their inflation rate is in comparison to ours but i think you got where he was going uh with this is there anything else you'd like to elaborate on in relationship to where he was going sure so i'll just say these things are there differences between uh even though we have a very similar inflation rate from with with a lot of the large european democracies now pretty close um there's there are differences between countries and the difference with the us compared to the the european countries is that ours is more about demand we have areas of our in our economy where demand is substantially in excess of supply that's not mainly a feature of the european economies where they're really feeling you know very very uh high inflation because of energy prices and also food prices now that's part of our story too we're also feeling energy energy and food prices but we have this other part that is that is more core inflation that is more susceptible to being managed by our tools and is really the object of our tools my time is all right but in light of your response to my first question i just need to say for the record i can't conceive of a single connection between gas prices set by global markets and giving advice to small businesses and the saying i have a hard time coming up with a theory of how allowing discriminatory housing will help stem inflation uh and i think my time is up uh i yield back general women's time has expired the gentleman from texas mr session is now recognized for five minutes thank you very much chairman uh chairman powell thank you very much for taking time to be with us this is important to the american people who hear our questions this is important for us as we weigh and measure engage your input which we believe is exceptional i've stated that to you in the past that i believe that we need to have confidence in what you're doing today i'd like to if i can without dissecting your thinking use some of the words that you have provided for us today to see your thinking you had stated that as it relates to the fed quote we don't give advice to agencies now that's a quote from you today we don't give advice to agencies do you think that advice is different which i do then tools which you have to do your job but i consider part of what you do best perhaps the fed is advice can you help me to understand we don't give advice to agencies well so i i think particularly on fiscal matters people fiscal matters affect people's lives it affects industries and people and you know tax levels and spending that in our system is the province of elected people and you know for someone who's an appointed person who hasn't stood for election and has a very narrow mandate i just think we you know that's that's not appropriate if we're going to wander into into those kinds of things then what would be the case for our independence if we're going to be involved in every political issue that isn't directly connected to our work then why would we be independent we should just we should just be another agency but we have this independence and i think to preserve it we need to stick to what we do and you know resist the temptation to work on every problem even the ones that are not assigned to us well let me say thank you for the answer you do know however as we were talking about student loans it's a rather large amount about a trillion two that is out there you stated that you believe that would likely be dealt with in legislation now that's what you said likely to be dealt with in legislation student debt i think even private advice not within your tool structure but this advice that we're trying to land on would be really important because it will be the way i see it the next large hit to inflation and this is why republicans or at least this republican says that i believe that this administration the democratic party are making friends with inflation they are using the toolbox that they have of politics and money and spending policies to make friends with inflation so my point would be to you i sure hope that someone could send an unnamed memo to someone saying that you have an opinion if you have an opinion on that next point uh we have had some discussions about unemployment how is unemployment calculated so you have to be actively looking for work within the last month to begin and not have a job to be unemployed if you're if you're not looking then you're out of the labor force and that that's uh so you're not participating in the labor force so that's those are the factors so what we want to do some members of this committee have wanted to look back and to say well perhaps under president trump it was 3.5 now we're 3.6 so not a big difference and yet the huge number of jobs that are available is really the factor when we're not jobs that is a problem but to simply say well trump was 3.5 now we're 3.6 everything is fair it's all done i think the other advice i'd love to have you have from the fed is to someone about getting people back to work because today the the government has given zero instructions for federal workers to return to work and i think that it is causing a mindset among many we don't need to go to work thus reflected in 3.6 unemployment and millions of jobs awaiting mr chairman thank you for taking time to be here it's my hope that you would find in your toolkit advice that becomes perhaps more important and i thank you sir thank you how much time has expired the gentleman from florida mr lawson is now recognized for five minutes madam chair can you hear me yes sir we're loud and clear and we can see you okay thank you okay uh i want to thank mr powell for and welcome back to the committee i know it's a great deal that is going on mr powell i think earlier there might have been something that came from one another my colleagues and it was a rising interest rate the complex combat inflation uh does come with a a rising unemployment rate impossible contributing to an economic recession while white unemployment rates have dropped to pre-demon levels pre-packed damage levels of three percent and in qri in 2022 the national black uh unemployment uh rate remains still at 6.5 percent and and and i know something you can't say but uh but what suggestion can you offer to help prevent black and other minority communities from facing future economic inequities as the federal reserve consider uh continue to raise rates uh in the near future if i heard your question correctly it was whether we're considering future additional future interest rate increases sir that's correct yes so i i think um just last week my colleagues and i wrote down our forecast for this year and we anticipate ongoing rate increases uh over the course of this year yes additional rate increases do you believe that the defense current inflation projection of 2022 and 23 may remains a good uh benchmark to consider even with these uh vulnerability potentials growing in the upcoming months i i think we these are the projections that the latest projections that individual fmc participants submitted were submitted last wednesday so i think they're still fresh and uh then there's a range of a range of expectations of people on the committee but i think they're a reasonable a reasonable set of projections yes okay and my spouse several of my colleagues on the other side of the aisle in uh about uh you know the buying policy and so forth which i know you can comment on uh but uh but there is a concern um uh where we were kind of caught off guard with the war in ukraine and then at the same time uh our vulnerability of all of the things that we depend on for other countries in your deliberation when you all are working uh with uh the situation that has arrived that have been that came from the russian ukraine war and other real estate and other stress uh in china spilling over into the united states the defense give a recommendation back to the administration on how we should proceed in the future because everything you know uh we've done a lot of things with other countries and depend on a lot of countries for resources and so forth and it looks like we're becoming very very vulnerable it doesn't look like it we're becoming very vulnerable to uh this dependability uh do you all make a recommendation back to the administration on how we should proceed in the future no no sir we do not okay and so early on you said that this problem let up uh that policy position is left is uh should be uh considered by the legislature out of the administration am i correct i'm sorry i lost track of what you said there i apologize i think to some other colleague of mine you stated that those policies uh should be left up to the congress uh on to the administration you all don't really deal with that aspect of it am i correct well i'm sorry which aspect of it about what recommendation could be made uh for all of the things that we have on show that we depend on from other countries and i might not be really clear but for example like the uh the gas situation now with russia you know and wheat and stuff with ukraine and stuff of this nature no we're not we're not in those discussions those are those are really discussions that happen inside the administration um the treasury department and the white house and the other uh agencies okay with that uh madam ciao yield back gentlemen yields back the gentleman from missouri mr lippinpiner is now recognized for five minutes thank you ma'am chair and welcome chairman powell long morning for year and afternoon um question for you with regards to uh a quote that on march 17th the cfpb put out in a blog on rising interest rates in which they said i quote the cfpb is the arm of the federal reserve system that is fully focused on consumers ensuring that markets are fair transparent and competitive end quote do you believe the cfpb is an arm of the federal reserve and do you have any control over their actions well they're an independent agency we have no control whatsoever are their actions they are actually though legally a bureau the law makes them a bureau and and in our the profits that we make uh off of our balance sheet we give we give all of them to the treasury department except the part that we give to to the to to pay for the cfpb does that make them all practical purposes they're they're fully independent in all of their they're not an arm of the federal reserve then i wouldn't consider that an arm they have a relationship but they're not an army i think they're a bureau but they're not under you with so they're not unknown how they can be we have no supervision you know we do we collaborate with them we coordinate with them we talk to them well this is this is overreached by the director i just want to make sure that everybody's on the same page this is a bunch of nonsense so it needs to be put in this place um chairman you've got the hands full right now and this is wall street journal from tuesday we had economists say recession is likely down here we said stocks are not not bottoming very soon so we've got some concerns i know yesterday you were in the senate and you know there was a long lengthy discussion on inflation which has been here as this morning as well and in my mind there's four root causes of inflation and we've had economists in in your chair a few weeks ago and i had one in my small business committee a couple weeks before that and i asked the same question of them i said it looks to me like there's four causes of inflation monitors monetary supply rules and regulations energy and supply chain slash job problems that we have with workers in economy today and they both agree that's basically your four problems that are underpinning inflation i asked them to to give me a percentage on each one of them they said roughly 40 for money supply 20 20 20. so i guess my my concern is that you know if you look at those four causes you're trying to help fight inflation that's one of your mandates and you're really under money supply is the only thing you have any ability to do something with and even then it's probably only half of it because that congress has control over uh how many dollars are put into the system with additional bills like the trillion dollar stimulus package from last year taxes and things like that so it looks like you have a minimal amount of impact out of those four things so it looks to me quite often times whenever you're trying to control the inflationary stuff with the interest rate it's kind of over here trying to do a little something when over here there's all sorts of stuff going on and administration keems seems to be a contradiction to some of the things you're trying to accomplish over do you ever feel like that do you believe that that may be a position that that you're in right now so we're we're very focused on the part of the the job that we can do and using our tools to do it well i understand that mr chairman but i would seem they would think that your all these other factors fall outside your purview here and for you to try and manipulate it and everybody rely on you to solve the inflation problem by tinkering with the industry over here it looks like that's a little over over hyping the situation but um one of the things that is is very concerning is the regulatory cost in my discussion with the with the economist he said look and this is the administration's own figures last year my administration cost uh the cost of compliance with new regulations was 201 billion dollars that's astronomical that's a huge cost that everything has to be built into all the small businesses and other businesses whenever they produce products and services for sale for customers they've got to build an additional 200 billion dollars in costs every year would you agree that's a huge driver of inflation it sounds like a big number yeah and as you know we we try at the at the fed to weigh costs and benefits and uh yeah take that into consideration would you agree that those other four things that i i i said are underpinning and facial would you agree that those probably are the four major problems yeah so most overwhelmingly most economists would would not would not think of it in terms of of money supply but would think of in terms of supply and demand and although there may be a role for money supply they would think in terms of supply and demand being being out of balance and that's how i think about it you know the definition inflation i've always had was too many dollars chasing too few goods and services if you throw more money in you have more money just to supply it to there's 40 or 40 plus years of history of actually milton friedman at the end came back and said you know that's not really working mr chairman i just keep working again though is this one more quick comment for you with regards to this it looks to me like whenever you're modeling when you're trying to model and you're using four different things i hope that your models are including these things in your modeling i appreciate just a 13 seconds they'll be able to finish my question thank you madam chair absolutely thank you gentlemen from california mr chairman who is also the chair of the subcommittee on investor protection entrepreneurship and capital markets is now recognized for five minutes chairman paul i want to thank you for bringing to the attention of this committee over the last several years the systemic risk posed by a tough legacy libor some 16 trillion dollars of instruments where we would not know the interest rate that the debtor is supposed to pay the creditor and 16 trillion dollars is a big problem we passed the relevant bill back in march and uh for those who think congress can't possibly deal with the problem until after the last minute we passed it a year and a half before the libor hit the fan that bill requires rulemaking by the fed and the rulemaking is supposed to be done by mid-september and that would put us in a that's the final step in making sure that these libor instruments uh are not a subject of uncertainty because even one basis point a thousandth of a percentage point of of risk or uncertainty turns out to be significant when you're dealing with 16 trillion dollars uh so chairman powell can we count on the fed in getting these uh regulations out by mid-september yeah so um by the way thank you for all of your efforts on this uh technical problem um which have really really helped move it along um and in terms of the rule yes we know the deadline we know it's a tight deadline and i'm assured that people are working very hard to meet that deadline thank you um you're shrinking your balance sheet a lot of focus on how much you're shrinking your balance sheet but it also what matters is the content of the balance sheet you can invest in treasuries or you can invest in mortgage-backed securities if you go to an all treasury portfolio and sell off your mortgage-backed securities that'll probably raise mortgage rates and we're trying to deal with the uh with housing inflation and housing affordability so whether it's the mortgage on an apartment building that might be built or whether it's a home mortgage um keeping mortgage rates low i would think would help inflation is there any possibility that you would take a look at that and perhaps keep in your portfolio some of your mortgage-backed securities and perhaps have a mix of mortgage-backed securities and treasuries in your balance sheet so we we're committed to having a mostly treasury not all but mostly treasury balance sheet and we don't have that now and you know treasuries are going to start to roll off mortgages much less so we have not decided to start selling mortgage backed securities but we've said that we'll look at that again when uh when this process is further along and if we do i i don't actually think that that the things we would do would have much of an effect on on mortgage rates compared to well but the effects that we've already had um we have obviously faced a recession risk biden says that uh a recession is not inevitable do you agree i i don't think that a recession is inevitable thank you um there seems to be a great debate in this committee as to whether inflation is the result of covid and the effects of the ukraine war which are affect the entire globe or whether there are the result of biden and his policies which believe it or not are not uh applicable to germany uh britain or canada as much as we in the america like to think that we are the entire world and then we look at inflation rates and we see higher month-to-month inflation rates in canada and germany than here in the united states higher year on year in germany and the uk so we're in a situation where only if you believe that biden is responsible for german inflation can you reach the conclusion that it's biden's policies that have caused inflation in the united states which is pretty much on a par with what we see in other uh developed countries particularly europe a part of this is the idea that if biden just gives a speech um saying we'd like to see a fossil free future that that somehow impairs the amount of oil that is produced in the united states and somehow then affects worldwide oil prices i would put into the record this article from forbes titled uh u.s oil companies have increased drilling by 60 percent in one year and uh without objection i hope that and uh i would point out that we had higher oil production in this country in the first year of biden than the last year of trump then we had higher oil production in 2022 than 2021 and in 2023 we will have the highest oil production in the united states in our history unfortunately that will probably not be the lowest gas prices in our history so whether it's good or bad we've discovered that making speeches does not does not expire i yield back the gentleman from michigan mr heisenga is now recognized for five minutes uh thank you madam chair and it's just so ironic that uh that my colleague is talking about oil and pumping i literally just left my office with a group of uh folks from alberta uh there is an alliance of six energy companies up there that are going to get by the way to net zero on their carbon emissions by 2050 but canada supply 62 percent of all the oil that is imported here in the united states or they did but they can't pump it here or they they can pump it but they can't pipe it here because keystone pipeline which was bought by the canadian government was cancelled by this administration so hell yeah we can blame the biden administration for some of this uh inflation and i'll refrain from that again but heck yeah they uh they are directly responsible for gas prices and what we are seeing here so don't you're trying to spread this around that it's putin's fault that it's everybody else's fault meanwhile this president is flying to saudi arabia and won't go to alberta and won't pick up the phone and talk to justin trudeau about getting canadian north american oil here that is security let's not stop going to our adversaries and go to our allies all right so i need to take a breath here a moment and mr paul i'm glad you are here and i do believe that you attempt to be less political than maybe some of your other predecessors but i do want to briefly point out something that mr stiles and mr timmons raised earlier regarding your comments uh in february 2021 as congress was debating the biden stimulus uh stem mr timmins cited those comments earlier well in fact your quote is still highlighted on the website of the house budget committee the majorities house budget committee under the headline quote experts and leaders agree the country needs the american rescue plan now so your words are listed alongside quotes from the minneapolis reserve bank president the president of the federal reserve bank of atlanta and again this is from 2021 and i just wanted to hear uh wanted the the the hearing record to reflect this timeline first of all and ask you do you think that maybe your quote should be taken down from that website knowing what we know today i i it's not up to me whether people take down the quote let me let me tell you though if you're trying to be apolitical that and allowing those words to stand with this mess that has been created in the economy doesn't stand so i guess that's up to you but if you're if you're going to strive for that i would suggest at least have some of those folks sitting behind you they might want to make a phone call all right um so uh we have discussed uh during your last visit uh that i've long advocated for a rules-based approach to monetary policy we talked about the taylor rule i've suggested the yellen rule uh now with your reappointment it could become the powell rule i don't care what it's called uh but i am uh very concerned uh that uh that we are not looking at those guideposts and having those guideposts i am i'm glad to see that you uh that in the fed's most recent report you did once again include a section on monetary policy rules uh which had been omitted from from the previous version and you and i had discussed that at that i want to read a quote from the june report and then get your thoughts although simple rules cannot capture complexities of monetary policy and many practical considerations it is make it undesirable for the fomc to adhere strictly to the prescriptions of a specific specific rule some principles of good monetary policy can be illustrated by these policy rules so my question is this what principles do you believe are important when the fomc is making decisions on monetary policy well what principles are important well um and we've got a minute with a quick gavel so please so uh you know i think i think to try to think systematically about monetary policy and not be you know fully discretionary you know to try to have a frame of reference what are we trying to do the taylor rules what they do is they embody the dual mandate it's really that you're what you're looking at in the standard taylor role in all the spin-offs is how far are you from your price stability mandate how far are you from your from your employment mandate and that that tells you it's a frame of reference and i think that's that's a useful thing to have okay um we got 30 seconds less uh obviously what i'm trying to push for is more transparency from the fed um i also want to very quickly revisit your interaction with mr gothheimer where he spoke about the importance of preserving innovation and competition in the digital asset marketplace which i agree with 100 percent in fact republicans on this committee included that as part of their working principles uh last year um so let's talk about that light touch uh that uh when it comes to legislation however one of my colleagues also know that regulators right now are being very heavy-handed which i'm getting expired and i will follow up with in writing on that but we need to be here gentlemen's time is heavy how heavy-handed regulators are thank you i yield back the gentleman from illinois mr caston is now recognized for five minutes uh nice to see you chair pal um i want to just start by thanking you for for your service over these last couple years i know you and i have talked before that your your rhetoric your language making it clear to all of us into the nation that we needed a balanced fiscal and monetary policy in response the downturn created the political space for us to do what we did i don't think we could have done that without your voice and the fact that we had as not only as rapid a recovery but as equitable a recovery as we did was because we had that space and i i think history will show that we owe you more gratitude than we've given you and i thank you for that the the fact that wages grew fastest for the bottom quintile did not happen but for that fiscal policy that complemented what you were doing and yet we find ourselves today with people talking about fear of a recession and i would submit to you that the fear of a recession is not because our economy is weak but because our democracy is weak if if if we were to use our tool on this side of the dies to say what should we do to address labor markets we'd reform our immigration system what should we do to reduce people's exposure to high-priced volatile fossil fuels we'd make massive investments in cleaner cheaper energy what should we do in response to housing supply constraints we'd invest in housing i could go on and on everything on that list is deeply deeply partisan because the markets are looking at the united states and saying do we do people in this line of work those 537 of us who have the privilege to hold federally elected office do we see human pain and suffering as a problem to be solved or is a frailty to be exploited for our political ends they look at my colleagues who two years ago thought it was harder to stand up to vladimir putin and support ukraine and say they're going to do the same thing again they look at the talking points that all of you get every monday it says talk about biden's energy crisis his border crisis don't do a damn thing i admire your obedience do you have an ounce of leadership in your bodies and so now we're left here in this moment and i i'm not going to ask you to opine on policies i understand you can't do that but you were so eloquent two years ago and saying if we don't balance fiscal and monetary policies we are going to be looking at a recovery that looks much more like the great depression or the 2008 regression where it was a long slow recovery what concerns do you have right now if the only tools we use to respond in this moment is monetary policy well um honestly i'm as you can imagine i'm very focused on on monetary policy and i think that the the country the thing that i assume you're hearing from your constituents at home is about inflation and that is our assignment you know it's not that we control all of it well i guess and i'm sorry to interrupt but we are but when i when i talked to i talked to the cfo of a manufacturing company a month ago and he said my business school teacher taught me to do just in time inventory and now i'm trying to manage to just in case inventory that requires capital we talked to chip manufacturers who saying i need money to build but i need a labor force to grow there and i don't know how to do that unless i have access to capital raising rates is great at curtailing demand it's also great at curtailing supply so what concerns do you have if all we do is raise rates well um you're right we there would be supply effects as well for example to look at housing you know if housing starts will slow down and i get that but ultimately we have a job to do which is to restore price stability so that the economy can function well it's really the bedrock of the economy and it's most important for the people at the lower end of the spectrum who are now seeing their their wages and and savings eaten up by inflation so we need to do that there there's lots of other things that need to be done in the economy and that that aren't the business of the fed but uh we we have that job and that really is our focus along with of course preserving a strong labor market that the two the two mandates are equal in the current situation the labor market is very strong it's extremely strong two two vacancies for every unemployed person three point six percent unemployment and wages moving up so it really is a question of getting inflation under control and that is that is um you know that has to be our our focus well i guess i would just ask you to use your voice as eloquently as you have over the last two years not asking you to tell us how to do our job but the supply pieces matter and when the market is baking in a recession i can i can justify that logic if the only tool we use are the tools under your purview thank you i yield back the general yields back the gentleman from kentucky mr barr is now recognized for five minutes mr chairman i i visited with farmers in fleming county kentucky last friday my constituent charlie masters asked me to emphasize the extreme pain he and other hard-working americans are experiencing as a result of this inflation crisis and specifically he told me that he couldn't afford the skyrocketing cost of diesel fuel for his tractor he added that quote i don't know how the government says the inflation rate is 8.6 percent because for those of us in the real economy it feels more like twice or three times that rate that's how painful this is mr chairman i appreciate your humility and acknowledging that both the bite administration and the fed were wrong last year when they assessed inflation to be transitory clearly the failure to more urgently tighten monetary policy was a serious mistake so while far too late i appreciate the current commitment to aggressive tightening including the recent 75 basis point rate hike but on behalf of mr masters and my other constituents who are suffering with these price hikes i encourage the fed to exercise fortitude in restoring price stability and staying focused even in the face of financial market volatility staying focused on fixing the supply demand mismatch in our economy so i have a question about the demand side and one on the supply side on the demand side clearly within the influence of monetary policy the fed has stated that its inflation target rate is two percent the inflation rate last month month was eight point six percent and as my constituent pointed out it feels even worse given the chasm between where we are and where we need to be do you anticipate any effort within the fomc to increase its inflation target to three or even four percent and will you commit to resist any efforts to change the inflation target that would make it even more difficult to anchor inflation expectations no that's just not something we would do we're shooting for two percent great and will the fomc consider reversing the adjustment to the inflation targeting framework that it made in around august of 2020 to get back to a target of two percent we'll revisit that in a couple of years i will say that that's really not the story behind why inflation is so high right now i acknowledge that but given the the the work you all have to do i would offer that as a consideration for the fomc um what is the end point for your balance sheet reduction efforts well it really is when the balance sheet is at a size that uh you know that we can conduct monetary policy rough roughly uh in the range of two and a half or three trillion smaller than it is now okay uh and we were at four trillion uh now we're at nine or a little less than nine so there's you're saying two or three we're looking at it as as if the role okay we look at it as a percent of gdp really and so we're trying to get back to roughly the level of gdp we were at i see uh on the supply side you testified earlier that supply chain issues in the price of oil oil are out of your control i respectfully disagree in part certainly the fed does not and should not implement fiscal or energy policy but in light of the impending confirmation of michael barr's vice chairman of supervision i am concerned that the fed's regulatory framework could exacerbate supply constraints and specifically forcing banks to sideline capital that institutions could to to could deploy to spur business investment gold plating us bank's capital requirements seen recently with the basel committee's modification to the g-sub surcharge in the eu which reduces our domestic competitiveness and especially the climate finance agenda and climate stress testing that would redirect capital away from fossil energy precisely at the wrong time when um when we need more not less investment in uh fossil energy and when a gallon of gas is five dollars nationally and rising do you acknowledge the role on at the fed uh related to business investment regulation uh constraining further constraining potentially supply well we we certainly do not want to be and are not in the business of allocating credit either to or away from any particular industry we want those decisions to be made in the private sector well on the regulatory supervision side of the of the house there is a supply-side impact and excessive regulation uh especially in the climate finance area where we need more investment in energy that could have an impact on your inflation uh fight finally a question about fed independence last week my democratic colleagues passed a bill out of the house that would add to the federal reserve's mandate by tasking the board with the additional responsibility of addressing racial and socioeconomic disparities rather than remain focused on price stability my question is uh when inflation hurts minority and low-income populations the most do you believe giving the fed new responsibilities that fall outside of its core competency would politicize the fed and compromise your independence precisely when you should be focused on combating inflation gentlemen's time has expired we'd love an answer to that question madam chair i think um mr powell can submit that in writing and forward it to you then i'll just say i think the public just very quickly then because we've got people waiting and you have a hard stop at one i just was going to say that the public's been well served by the dual mandate and i would be concerned with any statutory requirement that that sets us up to uh to be accountable for achieving things that we can't achieve with our tools and and i do think that's a concern thank you thank you i yield back gentleman from new york mr taurus is now recognized for five minutes uh thank you madam chairman thank you chair powell as you know one of the dominant drivers of inflation is housing the affordability crisis is one of supply and demand the demand for affordable housing far exceeds the supply do you believe as i do that public investments in an expanding housing supply would bring us closer to addressing the housing affordability and housing inflation crisis so i would agree that housing is in short supply and there's an issue there but the question of how to address that is is one for you right but if if public investment had the effect of expanding the housing supply that would have an impact on reducing inflation in the long run is that a fair assessment again i'm you know i'm reluctant to be drawn into supporting no i'm actually just an objective description of the impact i'm not asking for you to express the support more more supply generally you know means uh means that uh lower prices right constantly then prices would be lower okay uh even if you raise interest rates prices might nonetheless remain high because of supply chain disruptions catastrophic climate change will over time open a pandora's box of supply chain disruptions is it fair to say that catastrophic climate change if left unchecked will likely lead to more inflation and not less and will likely render the fed less effective at reducing inflation would climate change do that yes you know over a very long period of time i think it would be very hard to say and it'll depend on what's the governmental response it will depend on what's the private sector response uh it certainly has the potential i think some people think that that dealing with climate change will will put upward pressure on on inflation though but in the long run if climate change disrupts the supply chain right that will obviously lead to higher inflation and that's the kind of inflation that the fed would have most trouble reducing is that fair to say yes but again i i'm reluctant to get into an issue that we're not we're not climate policymakers we don't we don't have to weigh these decisions that you do it's it's really a question for elected officials regarding the president how much higher could the interest rate go what does the worst case scenario look like how much higher could the interest rate get so um you know no higher than it needs to go but we think but what's the worst case scenario i wouldn't say worst case but i'll tell you where what i think the the point is to get we think that the first of all financial conditions have tightened very broadly what but but the federal funds rate our own policy rate is still quite low so we want to get it up to neutral pretty quickly and then after that we think it needs to be in a place where it is moderately restrictive meaning above the neutral rate and that's only appropriate because we have inflation at a four decade high so my colleagues and i wrote down sort of a range of three to three and a half percent by the end of this year and then maybe three and a half to four percent now that's that's all highly conditional uh based on many many assumptions i think we'll do what makes sense as we go but those are those are rough estimates i think of what we think might turn out to be appropriate and the fed has a target of two percent how long will it take you to reach the target so we in forecasts uh um i i would i would say generally my colleagues and i expect that inflation will move down over the course of the next two years much closer to the target um my understanding is that one of your projections is that headline and core inflation will subside in 2023 to 2.6 and 2.7 respectively is there any historical precedent for reducing inflation as rapidly as the fed is projecting well yes i mean uh unfortunately paul volcker had to do something very much like this much much larger on a much larger scale and yes we we you know core inflation core pce inflation has actually tracked down a little bit from the very hot levels of late last year and is closer to four percent so i think it's it's plausible that but through using our tools and and ideally the supply side healing that we could get inflation down to those levels next year as as i understand that there are two models of cpdc's intermediated and disintermediated the fed can either operate through the commercial banking system or it could enable consumers to have direct accounts with the fed which approach are you inclined to favor intermediated and immediately actually don't have legal authority to provide accounts to anyone but depository and you said it the fed has said it does not intend to proceed with the issuance of a cbdc without clear support from the executive branch in congress do you see congressional authorization as a policy preference or is a precondition for creating a cbdc i think we'll need to have an authorizing law and i think if we haven't decided whether this we think this is in the public's interest if we do we'll come to you again but as a matter of law is it a policy preference like what is your view matter of law as a matter of law okay yeah i see my time is expired the gentleman from arkansas mr hill is now recognized for five minutes thank you madam chair mr chairman thank you for being on the hill this week we greatly appreciate it and i wanted to change subjects you've had a lot of good interaction today and i want to talk a little bit about a rising interest rate environment and the impact on the fed itself the new york fed released projections for the fed's balance sheet as a part of its annual overview of its 2021 open market activities and they announced to the public that the fed portfolio could run a projected loss of about 300 billion dollars through 2024 as interest rates continue to rise since you have an enormous biggest in the world i guess a fixed income portfolio the fed's most recent financial statements for the first quarter show an unrealized capital loss of 450 billion dollars during the quarter so my first question is does the fed need a positive capital cushion in order to carry out its mission as our central bank no we don't can you explain to people why not sure so what we do is um you know our liabilities are currency for example is a liability to us and it doesn't earn we don't pay any interest on it but we own the contrary asset as treasury bill so we actually have substantial earnings and we give those to the treasury department by law over the course of the year and we've given a trillion dollars worth of of of those earnings treasury department over the years so we don't retain it as capital because we don't need it it's literally not required uh for us to conduct the operations and do monetary policy we don't and we have a very thin sliver of capital but it's sort of symbolic it's not something we're not a private institution so as interest rates uh increase and you have to pay out interest on reserves and you've got about 9 billion dollars i think of operating expenses there's a point in this interest rate increase where potentially you'd be at an operating loss i take it and that you would not be having a profit to distribute to the treasury is that possible yes that can happen but again it will have no effect on our ability no effect whatsoever on our ability to conduct policy and it's not something we would consider in setting policy right and you just would treat that as a deferred asset is that right this is money you owe back to the the treasury when you start making a profit you'd pay that defer you'd write that deferred asset off exactly right and we'll pay it back down to zero so how does it then since the congress has imposed on the fed an obligation to pay for the consumer financial protection bureau all their operating expenses they just send you a memo and ask you to pay for that when you don't have cash is that added into that deferred account asset yes as a practical matter it would be it's it would be very small compared to your overall operation but yeah it's one of those i think errors i think congress made honestly by imposing on our independent central bank you know an obligation to in theory fund and on budget operation in retrospect over the last 10 years do you agree philosophically that ideally the fed earnings wouldn't be earmarked for a particular on-budget operation you know in a in a in a perfect world we would fund agencies through different means but either either you know many of them are self-funding they they get funding yeah i agree with you i think it ought to be on appropriations i've always felt that way i think it puts the fed in an unusual position and here as rates rise and your earnings may go negative as you pay out more earnings than you obtain and unrealized losses this just puts that in mind let me thank you last time we were together and you were before the committee we noted in the review that the rules regarding potential monetary policy rules had not been included in the report to congress so thank you for putting those back in to the congress and i heard you talked to senator tell us yesterday about the importance of of rules can you tell us again uh how you use rules like the taylor rule to help guide you in interest rate policy so they're they're just embedded in our in the work that we do deeply embedded and basically and any time you make a forecast you have to make an assumption about monetary policy and and so what you do is you use a some form of a taylor rule and there are many there are many different iterations at this point i think but more fundamentally than that you know that we we do try to be systematic in monetary policy and rules you consult rules and help so let me uh just in the few seconds remaining taylor reel indicates i think short-term rates might be in the range of six percent you're not there yet obviously to fight inflation how do you get there and uh over what period of time so the real test is is that financial conditions need to be having if they need to be in a place where they're where they're causing the desired outcome in the in the economy and that's what and so there's been so much tightening that isn't reflected in the in the overnight rate yet right so really we've done a whole lot more than the changes in the overnight right thank the chairman i yield back thank you thank you very much and i thank the gentleman the gentlewoman from north carolina ms adams is now recognized for five minutes thank you uh thank you madam chair and chair power good to see you again uh i'm happy that we can now congratulate you on on your confirmation that you continue to serve as chair uh also i'm delighted that dr lisa cook an hbcu graduate and the first black woman on that board and dr phillip jefferson the fourth black man someone who teaches in my district at davidson have joined it as well so as we've discussed before you know how concerned i am about the housing market and according to your february monetary policy report our housing shortage has been intensified by the growing costs of construction materials so chair power how do you think the fed's interest rate uh increase will impact the cost of construction so i think it's going to to lead to and it is leading to a slowdown in in the housing market you're seeing fewer buyers uh you're seeing housing starts move back that the housing market's going to be cooling off it's been very very hot price increases have been extraordinarily high and um it's one of the channels through which monetary policy works is inter-sensitive spending in particular so i do think it doesn't directly affect construction costs to your question but many many housing builders many home builders do do uh work on borrowed money and it'll it'll certainly affect their profits and and their activities thank you you know i've heard uh firsthand from construction firms from affordable housing providers uh my city and my county and many others about the increase in construction costs and how seriously hampered these groups are uh you know to build more affordable housing so um yeah i think we need to really pay up a lot of attention to it and it's really a concern so uh thank you very much i know that i'm out of time and you probably are as well so thank you madam chair you're back thank you so very much i'd like to thank chair powell for his testimony today without objection all members will have five legislative days within which to submit additional written questions for chair powell to the chair which will be forwarded for his response to your powell i ask that you please respond as properly as you are able without objection all members will have five legislative days within which to submit extraneous materials to the chair for inclusion in the record this hearing is adjourned thank you thank you madam chair you

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Id: dOE0r10FUgY

Length: 181min 35sec (10895 seconds)

Published: Thu Jun 23 2022