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Biden, Powell Meet to Discuss Taming Inflation


A gas tank driver delivers 8,500 gallons of gasoline at an ARCO gas station in Riverside, Calif., May 28, 2022. (

With inflation in the United States at levels not seen in decades, President Joe Biden on Tuesday met with Jerome Powell, the chairman of the Federal Reserve, to discuss the ongoing effort to tame rising prices.

Over the 12 months ending in April, the Consumer Price Index, which tracks what average Americans pay for a broad array of goods and services, increased by 8.3%, down slightly from the month before, but still at a level not seen in 40 years.

The issue is a vital one for Biden, whose party is facing serious challenges in the run-up to November’s midterm elections. Public opinion polling indicates that rising prices are among voters’ biggest concerns at the moment, and high inflation appears to be driving down the president’s approval rating.

Political concerns

Despite political pressures, Biden approached his conversation with Powell cautiously, reluctant to appear to be meddling in the affairs of the central bank, which is meant to operate independently.

President Joe Biden meets with Treasury Secretary Janet Yellen, right, and Federal Reserve Chairman Jerome Powell in the Oval Office of the White House, in Washington, May 31, 2022.
President Joe Biden meets with Treasury Secretary Janet Yellen, right, and Federal Reserve Chairman Jerome Powell in the Oval Office of the White House, in Washington, May 31, 2022.


In advance of the meeting with Powell, Biden used an op-ed published in the Wall Street Journal to signal that he does not want to be seen as pressuring the Fed, contrasting himself with former President Trump, who frequently made public statements critical of Powell and the central bank.

“First, the Federal Reserve has a primary responsibility to control inflation,” Biden wrote. “My predecessor demeaned the Fed, and past presidents have sought to influence its decisions inappropriately during periods of elevated inflation. I won’t do this. I have appointed highly qualified people from both parties to lead that institution. I agree with their assessment that fighting inflation is our top economic challenge right now.”

Responding to inflation

As the central bank of the United States, the Federal Reserve is currently engaged in a very delicate process, attempting to slow price increases without tipping the United States economy into a damaging recession.

The Fed’s main tool in the effort is the ability of the Federal Open Market Committee, a body within the broader central bank, to set benchmark interest rates that affect borrowing costs across the economy.

As a result of the coronavirus pandemic, the U.S. economy was plunged into a recession in 2020, and the Fed lowered interest rates to just above zero in order to provide economic stimulus. A recession is typically defined as two or more consecutive quarters in which a nation’s gross domestic product shrinks. However, the National Bureau of Economic Research ruled that a two-month economic downturn at the beginning of the pandemic counted as a recession, making it the shortest on record.

However, low interest rates combined with other government stimulus programs and supply shortages related to the pandemic as well as Russia’s invasion of Ukraine snowballed to bring higher prices that have strained many Americans’ budgets.

In March of this year, the Fed began raising rates, and it continued with another rate increase in early May. With the “target” interest rate currently between 0.75% and 1%, the Fed has signaled that it will raise rates several more times before the end of the year, probably in increments of one half of a percentage point.

How it works

"Raising interest rates works by restraining demand in the economy and restraining spending,” Kenneth N. Kuttner, a professor of economics at Williams College and a former assistant vice president of research at the Federal Reserve Bank of New York, told VOA. “It's only through restraining spending that inflationary pressures can be brought down.

“In order to get inflation down, the Fed would have to slow the economy until the level of desired spending can be accommodated by the supply side of the economy, or maybe a little bit lower,” Kuttner said. “The problem is, if it restrains spending too much, then the economy is going to go into a … recession.”

The trouble is that there is a significant lag between the Fed’s decision to raise interest rates and the effect that the increase has on economic activity, Greg McBride, senior vice president and chief financial analyst for Bankrate.com, told VOA.

“By the time today's actions take effect, the economy may look a lot different than it did,” McBride said. “That's what makes this complicated and what brings about the risk of the Fed tipping the economy into a recession. They may be raising interest rates at a point where the economy is already slowing, and those rate hikes only serve to slow the economy further.”

McBride said he does not see a recession as likely in the immediate term. “The U.S. economy is growing this year, and the labor market is very strong,” he said. “Yes, growth will certainly slow through the balance of the year, but in terms of outright contraction, I see that more as a 2023 likelihood than 2022.”

Fed’s abilities limited

On Tuesday afternoon, in remarks at the start of his meeting with Powell, Biden reiterated his promise not to pressure the central bank over inflation.

“I’m not going to interfere with their critically important work,” the president said. “They have a laser focus on addressing inflation, just like I am.”

But while Biden may be counting on the Fed to bring down consumer prices, experts warn that many of the factors contributing to higher prices are well beyond the central bank’s control.

“The Fed has a very difficult task at hand,” said McBride. “A lot of that is tied to issues on the supply side, not just the demand side. The Fed cannot fix the supply chain. They can't open ports in China that are closed. They can't broker peace in Eastern Europe.”

He added, “What they can do is address the demand side in the U.S. … But without substantive healing of the supply chain, raising interest rates is not likely to be the panacea that it has been in the past, in terms of putting inflation to bed.”

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