Republican Louisiana Sen. John Kennedy criticized Federal Reserve Chairman Jerome Powell and the central bank’s forecasters over their failed inflation projections on Tuesday.
Before asking if the Fed would accelerate its asset purchases to control the surging inflation, Kennedy went after the central bank’s forecasters who have consistently failed to accurately project inflation, adding they have lost credibility.
“I realize that one is clairvoyant, but I think it’s fair to say that the experts who have been advising you about the future rate of inflation have pretty much the same credibility as those late-night psychic hotlines you see on TV,” Kennedy said.
Powell responded by saying that the forecasters failed to predict ongoing supply-side problems, mentioning the growing supply chain issues worsened by labor shortages and increasing wages. Additionally, Powell said that the Fed will consider accelerating its tapering at its December meeting.
“I think what we missed about inflation was, we didn’t predict the supply-side problems, and those are highly unusual and very difficult, very non-linear, and it’s really hard to predict those things,” Powell said.
On the topic of accelerating tapering, Powell said that “we now look at an economy that is very strong and inflationary pressures that are high and that means it is appropriate.”
Meanwhile, Powell expects the Omicron coronavirus variant to intensify inflation concerns while holding back workers as the labor market recovers, leading to more growing wages and further supply chain disruptions.
“The recent rise in COVID-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation,” Powell said. “Greater concerns about the virus could reduce people’s willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions.”
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