Blog: Fed’s ‘most important task’ is to control inflation, Brainard says – Reuters

WASHINGTON (Reuters) – Controlling inflation that has spiked to nearly a 40-year high is the “most important task” the Federal Reserve must tackle to keep the current economic expansion underway, Fed Governor Lael Brainard told a Senate panel on Thursday in a hearing on her nomination to become vice chair of the U.S. central bank.

FILE PHOTO: Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 19, 2019. REUTERS/Leah Millis/File Photo

“We are seeing the strongest rebound in growth and decline in unemployment of any recovery in the past five decades,” Brainard said to members of the Senate Banking Committee. “But inflation is too high, and working people around the country are concerned about how far their paychecks will go. Our monetary policy is focused on getting inflation back down to 2 percent while sustaining a recovery that includes everyone. This is our most important task.”

The session with Brainard, who has a PhD in economics and is a veteran of U.S. economic policymaking, could mark the start of a broader and potentially bitter partisan contest over the make-up of the Fed’s governing board, with Republican senators quickly flagging their concerns over her nomination.

Only four of the Fed board’s seats are filled right now, and pending Biden appointments, including for a second vice chair’s slot overseeing financial regulation, could advance what Biden and his Democratic supporters feel should be a bigger Fed role on climate issues and a tougher hand with Wall Street.

Brainard, a Democrat first appointed to the Fed in 2014 by then-President Barack Obama and confirmed at the time by a 61-31 Senate vote, would be a prominent player in that effort.

She was a frequent dissenting vote against steps taken during former President Donald Trump’s administration and under Fed Chair Jerome Powell to loosen oversight of the largest banks; called for the Fed to require financial firms to set aside more capital; and worried that Fed officials were behind European central bankers in understanding how climate change might effect the macroeconomy and financial system.

Senator Sherrod Brown, the Democratic chairman of the committee, opened the hearing with a glowing endorsement, calling Brainard a “steady hand” helping lead the Fed during the coronavirus pandemic, and “someone who understands that workers, not corporations, not Wall Street,” were at the heart of the U.S. economy.

But the panel’s top Republican, Senator Pat Toomey, sharply criticized Brainard’s “advocacy” of a new Fed policy approach that he said risks “an inflation tax on all Americans” to promote job growth for different demographic groups.

Toomey said he was concerned as well that she “has advocated the Fed shape environmental policy” by building climate analysis into its oversight of financial institutions.

A majority vote of the Senate, where Democrats exercise narrow control, is required to confirm Brainard to the vice chair position.

Brainard’s opening remarks stuck close to the monetary policy script used by Powell at his hearing on Tuesday, when he said the Fed will act as needed with higher interest rates and other measures to be sure inflation returns from its current high level to the 2% target.

Reporting by Howard Schneider; Editing by Paul Simao

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