Senator Jerome Powell called on the Federal Reserve to start withdrawing some of its economic support in a letter to Congressman Joe Manchin-URGES - the-federal research to address the issue-threat - of inflation — dont-overheat - our-economy, which the moderate Democratic lawmaker from West Virginia said he is worried easy monetary policy will fuel higher inflation.
With the recession over and our strong economic recovery well underway, I am particularly alarmed that the Fed continues to inject record amounts of stimulus into our economy by continuing an emergency level of quantitative easing, wrote Manchin.
Fed officials reduced short-term interest rates to near zero levels last year and began purchasing $120 billion in government bonds in a month to stabilize markets and support the economy after it was disrupted by the coronavirus pandemic.
Policymakers are in the process of discussing how to reduce those purchases, and Fed Vice Chair Richard Clarida said on Wednesday that it is possible Fed officials may announce a reduced in the pace of purchases later this year.
A spokeswoman for the Fed confirmed that the central bank accepted the letter but declined to comment further.
Manchin credited the sudden action from Congress and robust relief packages passed by Fed with helping to bolster the economy through the deep but brief recession last year. He said however, he was also worried that extra fiscal stimulus would lead to the economy overheating and unavoidable inflation taxes that hard working Americans cannot afford.
The $1.9 trillion relief plan passed earlier this year was criticized by Republicans and some Democrats, including former Treasury Secretary Lawrence Summers, who said they were worried it could cause inflation pressures.
Senators are currently considering a proposed infrastructure bill of $1 trillion, and some Democrats are in favor of another $3.5 trillion proposal.
The Senate does not affect monetary policy, but will have to confirm Joe Biden's nominee to lead the central bank in the Senate. The White House has to decide if it will keep Powell on after the term expiring in February of 2022.