Congressman Ro Khanna Federal Reserve Chairman Jerome wants Powell to apologize for the central bank’s handling of inflation.
“I blame the Fed and I blame Powell for mishandling the situation in the first place.” The Democratic Rep. told CNN in a phone interview. “He should take responsibility for what he messed up.”
Echoing concerns expressed by Sen. Elizabeth Warren of Massachusetts, Khanna said she worries the Fed will now overcompensate by raising interest rates so aggressively that it pushes the economy into recession.
“I’m worried now that they’re going to go too far the other way,” the California progressive said, describing what he called the Fed’s “policy of failure.”
The criticism shows how the Fed has become estranged from some on the left over a high cost of living that threatens to hurt Democrats at the ballot box this fall. Inflation, near a 40-year high, is among voters’ top concerns.
In particular, Khanna questioned the wisdom of continuing the Federal Reserve’s bond-buying program through early 2022. That program included buying tens of billions of dollars a month in mortgage bonds — lowering borrowing costs that stimulated an already overheated housing market.
“Why was he buying mortgage-backed securities for so long? If they had stopped doing that early we wouldn’t be in the situation we are in,” said Khanna. “The Fed hasn’t gotten the blame it deserves.”
The Fed reversed itself last fall, accelerating the tapering of its bond purchases. Now, the Fed is rapidly reducing its massive balance sheet, allowing $95 trillion in bonds to come off its balance sheet.
“Powell should start by saying, ‘I’m part of the reason we have inflation and President Biden wasn’t,'” Khanna said.
Of course, some economists argue that the Biden administration’s Bailout has contributed to high inflation, although there is much debate on this issue.
The Federal Reserve declined to comment, but Powell previously acknowledged that the Fed should have moved to a more inflation-fighting mode sooner. “In retrospect, it says we should have moved sooner,” Powell told lawmakers in March.
Federal Reserve Bank of San Francisco President Mary Daly acknowledged Tuesday that people are “suffering from the pain of high inflation.”
“They earn a living, they go to the store and they can’t afford the things they were able to afford last month,” Daly told CNN’s Poppy Harlow.
The San Francisco Fed president stressed the central bank’s commitment to controlling inflation by raising interest rates to “restrictive” levels to slow demand and push the unemployment rate up slightly to around 4.5%. But Daly added that Fed officials are not trying to cause mass unemployment.
“We don’t want to put millions of Americans out of work,” Daly said.