Congressional Testimony

MONETARY POLICY AND THE STATE OF THE ECONOMY HYBRID HEARING BEFORETHE COMMITTEE ON FINANCIAL SERVICES U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED SEVENTEENTH CONGRESS SECOND SESSION MARCH 2, 2022 Printed for the use of the Committee on Financial Services Serial No. 117–72 ( U.S. GOVERNMENT PUBLISHING OFFICE 47–131 PDF WASHINGTON : 2022 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 K:\DOCS\HBA061.000 TERRI HOUSE COMMITTEE ON FINANCIAL SERVICES MAXINE WATERS, California, Chairwoman CAROLYN B. MALONEY, New York PATRICK MCHENRY, North Carolina, NYDIA M. VELA´ZQUEZ, New York Ranking Member BRAD SHERMAN, California FRANK D. LUCAS, Oklahoma GREGORY W. MEEKS, New York BILL POSEY, Florida DAVID SCOTT, Georgia BLAINE LUETKEMEYER, Missouri AL GREEN, Texas BILL HUIZENGA, Michigan EMANUEL CLEAVER, Missouri ANN WAGNER, Missouri ED PERLMUTTER, Colorado ANDY BARR, Kentucky JIM A. HIMES, Connecticut ROGER WILLIAMS, Texas BILL FOSTER, Illinois FRENCH HILL, Arkansas JOYCE BEATTY, Ohio TOM EMMER, Minnesota JUAN VARGAS, California LEE M. ZELDIN, New York JOSH GOTTHEIMER, New Jersey BARRY LOUDERMILK, Georgia VICENTE GONZALEZ, Texas ALEXANDER X. MOONEY, West Virginia AL LAWSON, Florida WARREN DAVIDSON, Ohio MICHAEL SAN NICOLAS, Guam TED BUDD, North Carolina CINDY AXNE, Iowa DAVID KUSTOFF, Tennessee SEAN CASTEN, Illinois TREY HOLLINGSWORTH, Indiana AYANNA PRESSLEY, Massachusetts ANTHONY GONZALEZ, Ohio RITCHIE TORRES, New York JOHN ROSE, Tennessee STEPHEN F. LYNCH, Massachusetts BRYAN STEIL, Wisconsin ALMA ADAMS, North Carolina LANCE GOODEN, Texas RASHIDA TLAIB, Michigan WILLIAM TIMMONS, South Carolina MADELEINE DEAN, Pennsylvania VAN TAYLOR, Texas ALEXANDRIA OCASIO-CORTEZ, New York PETE SESSIONS, Texas JESU´S ‘‘CHUY’’ GARCIA, Illinois SYLVIA GARCIA, Texas NIKEMA WILLIAMS, Georgia JAKE AUCHINCLOSS, Massachusetts CHARLA OUERTATANI, Staff Director (II) VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 K:\DOCS\HBA061.000 TERRI C O N T E N T S Page Hearing held on: March 2, 2022 ................................................................................................... 1 Appendix: March 2, 2022 ................................................................................................... 55 WITNESSES WEDNESDAY, MARCH 2, 2022 Powell, Hon. Jerome H., Chair Pro Tempore, Board of Governors of the Federal Reserve System ...................................................................................... 5 APPENDIX Prepared statements: Powell, Hon. Jerome H. .................................................................................... 56 ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD Powell, Hon. Jerome H.: Monetary Policy Report of the Board of Governors of the Federal Reserve System, dated February 25, 2022 ................................................................ 60 Written responses to questions for the record from Representative Kustoff *(Responses were not received by publication deadline.) .............. n/a Written responses to questions for the record from Representative Luetkemeyer .................................................................................................. 133 Written responses to questions for the record from Representative Velaz- quez ................................................................................................................ 135 (III) VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 K:\DOCS\HBA061.000 TERRI VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 K:\DOCS\HBA061.000 TERRI MONETARY POLICY AND THE STATE OF THE ECONOMY Wednesday, March 2, 2022 U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. The committee met, pursuant to notice, at 10:02 a.m., in room 2128, Rayburn House Office Building, Hon. Maxine Waters [chair- woman of the committee] presiding. Members present: Representatives Waters, Maloney, Velazquez, Sherman, Scott, Green, Perlmutter, Himes, Foster, Beatty, Vargas, Gottheimer, Lawson, San Nicolas, Axne, Casten, Torres, Lynch, Adams, Tlaib, Dean, Garcia of Illinois, Garcia of Texas, Williams of Georgia, Auchincloss; McHenry, Lucas, Posey, Luetkemeyer, Huizenga, Wagner, Barr, Williams of Texas, Hill, Emmer, Zeldin, Loudermilk, Mooney, Davidson, Budd, Kustoff, Hollingsworth, Gon- zalez of Ohio, Rose, Steil, Timmons, and Sessions. Chairwoman WATERS. The Financial Services Committee will come to order. Without objection, the Chair is authorized to declare a recess of the committee at any time. As a reminder to all Members, we will conclude today’s hearing at 1:00 p.m.. Members who were unable to ask questions at our July hearing with Chair Pro Tempore Powell will be given priority to ask their questions today, and we will return to our normal order of recognition once those Members have asked their ques- tions. Today’s hearing is entitled, ‘‘Monetary Policy and the State of the Economy.’’ I now recognize myself for 4 minutes to give an opening statement. I want to start by reiterating that I join with President Biden and our allies in condemning Russia’s shameful, premeditated, and unprovoked invasion of Ukraine. I stand in solidarity with the peo- ple of Ukraine. Chair Pro Tempore Powell, since the last time you testified in July 2021, the United States economy has continued to boom, and our recovery from the COVID-19 pandemic is strong. Since the be- ginning of the Biden Administration in January 2021, our economy added over 7 million jobs, a record in the first year of a new presi- dency. In addition, wages and salaries for workers grew by 4.5 per- cent in 2021, the highest level in close to 40 years. While these are encouraging figures, we have more work ahead. Families across the nation are facing higher prices because of infla- tion created not only by pandemic-related supply chain problems, (1) VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 2 but also giant corporations taking advantage of economic conditions to pass on higher prices to consumers. Importantly, housing is a key measure and driver of inflation. For too long, we have not addressed the shortfall in our housing supply, and this lack of supply is driving up prices. In 2021, the national median rent for an apartment jumped by almost 18 per- cent, and home prices rose by 17 percent. These are the true driv- ers of inflation according to experts, despite repeated efforts on the part of Republicans to falsely blame pandemic relief and emergency stimulus as the primary cause. To address housing supply and other inflation drivers, the House passed the Build Back Better Act, and the America COMPETES Act, which make transformational investments, including $150 bil- lion in equitable and affordable housing, as well as improvements to our supply chains. Regarding digital assets, the Federal Reserve recently released a paper seeking public feedback on a possible U.S. central bank dig- ital currency, or CBDC, which would provide an alternative to vola- tile cryptocurrencies and benefit financial inclusion and promote national security. On the other side of that digital coin is a concern that pariah states like Russia may use foreign CBDCs to relieve the pressure of our carefully-coordinated multilateral sanctions. Leadership from the Fed on these issues is more important than ever. Lastly, I would note that for the first time, a Chair Pro Tempore of the Federal Reserve Board is testifying at this hearing. Senate Republicans have chosen to unilaterally block your confirmation, Chair Pro Tempore Powell, and the historic confirmation of diverse and highly-qualified nominees to the Board of Governors, leaving key leadership positions at the Federal Reserve vacant when it is tackling an array of economic issues, including those arising from Russia’s invasion of Ukraine. This will undermine our recovery from the pandemic and place our economy and financial stability at risk. At a time of enormous economic uncertainty, rising prices, and geopolitical turmoil, the Fed’s legitimacy is on the line. Now is not the moment for obstruc- tion, delay, and gamesmanship. So, Chair Pro Tempore Powell, I look forward to your testimony this morning. I now recognize the ranking member of the committee, the gen- tleman from North Carolina, Mr. McHenry, for 4 minutes. Mr. MCHENRY. Chairman Powell, we appreciate you being here. And I say to the Chair of the committee that this is the House. The Senate does nominations. If we wish to have an opinion, and direct the Senate, we should go run for the Senate. We have the Fed Chair here at a time of unprecedented economic conditions and a war that is happening. I think we should stay fo- cused on that. Chair Powell, thank you for your leadership. Thank you for your steady hand in your approach over this quite tumultuous first term of yours, and congratulations on your nomination and the expected confirmation of your second term. As we all know, the Financial Services Committee Republicans have offered and requested that the Biden Administration not ap- prove the $17 billion in International Monetary Fund special draw- VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 3 ing rights for Russia’s reserves last year. My hope is that my Dem- ocrat colleagues will withdraw their support for $60 billion in addi- tional reserves for Moscow in this year’s omnibus that is being ne- gotiated right now. We stand in a bipartisan way with the people of Ukraine, and we are grateful for their bravery, and we want to do everything in our power to assist and support them. Again, thank you, Chair Powell, for your leadership. America is facing the worst inflation we have seen in 4 decades because of Democrats’ reckless spending here on Capitol Hill. In- stead of a course correction, House Democrats keep hoping the Sen- ate will take up the $2 trillion in new spending through Build Back Better, or whatever they are going to call it. This would only make rising prices worse for families across the country. A Wharton budget model estimates that average American fami- lies spent $3,500 more last year to keep up with rising prices. No- where is this more evident than at the supermarket, where folks are seeing a 22 percent increase in grocery bills, according to a re- cent KPMG study. For a family of four, this could mean choosing between groceries they need, and saving for their child’s education, their retirement, or even a home. The American people should not have to mortgage their future because of Democrats’ love of more government spending to give them the illusion of prosperity in the moment. And despite what we heard from President Biden last night, simply telling people they are better off does not, in fact, make it true. However, I am pleased that the President sided with Republicans instead of Senator Elizabeth Warren, when he renominated you to Co-Chair the Federal Reserve. But as you know, Chair Powell, you have an enormous task ahead of you. As one of your predecessors famously said, the Fed’s job is to take away the punch bowl just as the party starts to warm up. But the Democrats have drunk deeply, and they want to move on to the harder stuff. That is a risk for our economy. We can’t let that hap- pen. I was pleased to see the Fed reject the notion of personal ac- counts by the central bank. As we have seen recently in Canada, and their unprecedented use of emergency powers to freeze hun- dreds of bank accounts, we need to ask not just how financial au- thorities can be used, but also how they could potentially be abused. It is disturbing that some Democrats refuse to see this danger and may actually view it as an opportunity to rationalize more government involvement in Americans’ everyday lives. And that is why I sent a letter to regulators today asking for clarity on what this disturbing move that we have seen in Canada could be—if anything to that accord could be done here in the United States and what we should do to prevent it. And I look for- ward to hearing their feedback. Again, Chair Powell, thank you for being here. These are unprec- edented times that you are serving. Thank you for your steady hand and your leadership and your willingness to answer questions using language that most of us can understand. And with that, I yield back. Chairwoman WATERS. Thank you, Ranking Member McHenry. VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 4 I now recognize the gentleman from Connecticut, Mr. Himes, for 1 minute. Mr. HIMES. Good morning, Chairman Powell. Mr. Chairman, probably the most effective tool we have deployed against Putin’s outrageous attack on Ukraine is the sanctions on the Russian central bank and the freezing of Russian foreign re- serves. Our ability to do so stems mostly from the dollar’s pre- eminent position as the world’s reserve currency. It is time—in fact, it is past time for all of us to lead on creating a regulatory environment in which we, rather than the world’s des- pots, terrorists, and money launderers, benefit from the emergence of cryptocurrency, including a central bank digital currency. Mr. Chairman, one of the headlines on my news feed this morn- ing reads, ‘‘Russians turn to crypto amid increasing sanctions,’’ as the chairwoman indicated. The subcommittee that I chair, and the full committee have done and will do hard work on this topic, but it is time for all of us to act. Mr. Chairman, I can’t shake the image of 17th Century bankers sitting around London, unable to imagine that their gold pieces and copper plates could be replaced by these worthless pieces of paper. Let us not be those guys. Let us lead and not follow. Chairwoman WATERS. I now recognize the gentleman from Ken- tucky, Mr. Barr, for 1 minute. Mr. BARR. Chairman Powell, thank you for being with us today. Inflation has hit a 4-decade high, with the Consumer Price Index (CPI) surging to 7.5 percent. Core inflation exceeds 5 percent. The Producer Price Index (PPI) is now pushing 10 percent. And re- cently-published inflation forecasts predict that the CPI will rise above 8 percent in the coming months. According to a study from the Wharton School, the average fam- ily spent $3,500 more for the same goods and services in 2021 versus 2020. Tax and spend policies are largely to blame. Steven Rattner, former Counsel to the Treasury Secretary under President Obama, put it eloquently in a New York Times op-ed. He said the $2 trillion American Rescue Plan was, ‘‘the original sin that contributed materially to today’s inflation levels.’’ A potent cocktail of excessive government spending creating ex- cess demand, combined with a hostile tax and regulatory environ- ment for private enterprise, which has constrained supply, have to- gether produced a toxic supply-demand mismatch, pushing prices up. Compounding these fiscal policy mistakes, the Fed pursued for too long an unconventional and overly-accommodative monetary policy, which has resulted in an inflation crisis that is hitting our constituents where it hurts. It is the clear that the Fed is not satis- fying its price stability mandate. I look forward to hearing from you on the path forward to ad- dress the monetary policy side of this equation. I yield back. Chairwoman WATERS. I want to welcome our distinguished wit- ness today, the Honorable Jerome Powell, the Chair Pro Tempore of the Board of Governors of the Federal Reserve System. Without objection, your written statement will be made a part of the record. VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 5 Chair Pro Tempore Powell, you are now recognized for an oral presentation of your testimony. STATEMENT OF THE HONORABLE JEROME H. POWELL, CHAIR PRO TEMPORE, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Mr. POWELL. Thank you. Chairwoman Waters, Ranking Member McHenry, and members of the committee, I am pleased to present the Federal Reserve’s semi-annual Monetary Policy Report. Before I begin, let me briefly address Russia’s attack on Ukraine. The conflict is causing tremendous hardship for the Ukrainian peo- ple. The implications for the U.S. economy are highly uncertain, and we will be monitoring the situation closely. At the Fed, we are strongly committed to achieving the monetary policy goals that Congress has given us: maximum employment; and price stability. We pursue these goals based solely on data and objective analysis, and we are committed to doing so in a clear and transparent manner so that the American people and their Rep- resentatives in Congress understand our policy actions and can hold us accountable. I will review the current economic situation before turning to monetary policy. Economic activity expanded at a robust 5.5 percent pace last year, reflecting progress on vaccinations and the reopening of the economy, fiscal and monetary policy support, and the healthy fi- nancial positions of households and businesses. The rapid spread of the omicron variant led to some slowing in economic activity early this year, but with cases having declined sharply since mid-Janu- ary, the slowdown seems to have been brief. The labor market is extremely tight. Payroll employment rose by 6.7 million in 2021, and job gains were again robust in January. The unemployment rate declined substantially over the past year, and stood at 4 percent in January, reaching the median of FOMC participants’ estimates of its longer run normal level. The improve- ments in labor market conditions have been widespread, including for workers at the lower end of the wage distribution, as well as for African Americans and Hispanics. Labor demand is very strong, and while labor force participation has ticked up, labor supply re- mains subdued. As a result, employers are having difficulties filling job openings. An unprecedented number of workers are quitting to take new jobs, and wages are rising at their fastest pace in many years. Inflation increased sharply last year and is now running well above our longer-run objective of 2 percent. Demand is strong, and bottlenecks and supply constraints are limiting how quickly pro- duction can respond. These supply disruptions have been larger and longer-lasting than anticipated, exacerbated by waves of the virus, and price increases are now spreading to a broader range of goods and services. We understand that high inflation imposes sig- nificant hardship, especially on those least able to meet the higher costs of essentials like food, housing, and transportation. We know that the best thing we can do to support a strong labor market is to promote a long expansion, and that is only possible in an envi- ronment of price stability. VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 6 The Committee will continue to monitor incoming economic data and will adjust the stance of monetary policy as appropriate to manage risks that could impede the attainment of its goals. The Committee’s assessments will take into account a wide range of in- formation, including labor market conditions, inflation pressures and inflation expectations, and financial and international develop- ments. We continue to expect inflation to decline over the course of the year, as supply constraints ease and demand moderates be- cause of the waning effects of fiscal support and the removal of monetary policy accommodation. But we are attentive to the risks of potential further upward pressure on inflation expectations and inflation itself from a number of factors. We will use our policy tools as appropriate to prevent higher inflation from becoming en- trenched while promoting a sustainable expansion and a strong labor market. Our monetary policy has been adapting to the evolving economic environment, and it will continue to do so. We have phased out our net asset purchases. With inflation well above 2 percent, and a strong labor market, we expect it will be appropriate to raise the target range for the Federal funds rate at our meeting later this month. The process of removing policy accommodation in current cir- cumstances will involve both increases in the target range of the Federal funds rate and reduction in the size of the Fed’s balance sheet. As the Federal Open Market Committee (FOMC) noted in January, the Federal funds rate is our primary means of adjusting the stance of monetary policy. Reducing our balance sheet will com- mence after the process of raising interest rates has begun and will proceed in a predictable manner, primarily through adjustments to reinvestments. The near-term effects on the U.S. economy of the invasion of Ukraine, the ongoing war, the sanctions, and of events yet to come, remain highly uncertain. Making appropriate monetary policy in this environment requires a recognition that the economy evolves in unexpected ways, and we will need to be nimble in responding to incoming data and the evolving outlook. Maintaining the trust and confidence of the public is essential to our work. Last month, we finalized a comprehensive set of new eth- ics rules to substantially strengthen the investment restrictions on senior Federal Reserve officials. These new rules will guard against even the appearance of any conflict of interest. They are tough and best-in-class in government here and around the world. We understand that our actions affect communities, families, and businesses across the country. Everything we do is in service to our public mission. We at the Federal Reserve will do everything we can to achieve our maximum employment and price stability goals. Thank you. I look forward to your questions. [The prepared statement of Chair Pro Tempore Powell can be found on page 56 of the appendix.] Chairwoman WATERS. Thank you very much. I now recognize myself for 5 minutes for questions. Chair Pro Tempore Powell, as you know, the Fed is required to conduct monetary policy in a manner that fulfills its dual mandate to promote maximum employment and stable prices. But as you VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 7 have explained, most of the inflation we are experiencing right now can be traced back to supply chain issues related to the pandemic, and the Fed cannot directly affect supply-side conditions. These supply chain constraints seem likely to only significantly increase as Russia invades Ukraine and the full effect of our sanc- tions take hold. If the Fed’s tools are mostly useful in stimulating or constraining demand, how can we expect monetary policy to rein in inflation that is largely driven by supply-side factors? Mr. POWELL. Our policies really cannot, as you point out, affect supply-side conditions. Our policies affect demand. What we are facing now is an elevated level of demand in the face of supply-side constraints, and it is the collision of those two things that is creating inflation. There is an important job for us to move away from these very highly stimulative monetary policy settings to a more normal level of rates, and perhaps tighter at a time when inflation is highly elevated, and that is what the Com- mittee plans to do. Chairwoman WATERS. It seems clear that the Fed has limited tools to address inflation and that Congress has an important role to play. The Monetary Policy Report notes major shortages in hous- ing supply as a factor in higher prices. If Congress were to make investments to alleviate these shortages, do you think this would be helpful in addressing inflation? Mr. POWELL. Major investments in housing supply? I think hous- ing prices are high for a number of reasons, actually: difficulty in getting lots; difficulty in getting materials; difficulty in finding workers; and very high demand. It has been extraordinarily high. Those are many of the features, and also low interest rates have made credit widely available. Mortgage rates are going up. That will probably begin to cool off demand. I wouldn’t want to comment on congressional legislation, but I do think there is, no doubt, a role for Congress. Chairwoman WATERS. I suppose I could conclude, without having you comment directly on fiscal policy, that you agree there are ways to manage inflation outside of monetary policy? It is not only monetary policy where others have a role to play? Mr. POWELL. I do think that is right, but more in a sort of medium- or longer-term sense. The Fed does monetary policy, and inflation is largely a monetary phenomenon. And it is our tools that can be used to address inflation. Over time, of course, anything that expands the productive ca- pacity of the United States over time would, in principle, make greater potential output and a less constraining economy. Chairwoman WATERS. Fed forecasters expect that inflation will subside as supply chain disruption issues are resolved. However, housing and rent prices, as you have said, account for roughly one- third of the Consumer Price Index, and most economists do not ex- pect the problem to be resolved as quickly as supply chain bottle- necks due to both the time it takes to develop housing and the lack of investment in housing that is affordable to low- and moderate- income families. Currently, there is a shortage of nearly 7 million rental homes that are affordable and available to America’s lowest-income rent- ers and a shortage of more than 5 million homes for potential home VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 8 buyers. In my district, there is a shortage of more than 34,000 rental homes that are affordable and available to the lowest-income families, while the State of California has a shortage of more than 962,000 affordable rental homes. If Congress does not make the investments to increase supply and access to the affordable homes in this country, how concerned are you that the Fed will not be able to contain inflation? Mr. POWELL. You are right that housing inflation is a significant part of the CPI. We also look more prominently at personal con- sumption expenditure (PCE), which is a different measure, and it is something less than that. And unlike these temporary supply-side constraints that we see, housing inflation really is much more of an indicator of the tight- ness of the economy rather than supply-side problems. So, it is something we watch carefully, along with wages, frankly, and it is a major contributor to inflation. As I mentioned, higher interest rates do—housing is a very interest-sensitive sector, and higher in- terest rates, really interest rates that move back toward a more normal level should act to cool off the housing market over time. Chairwoman WATERS. Thank you. The gentleman from North Carolina, Mr. McHenry, who is the ranking member of the committee, is now recognized for 5 minutes. Mr. MCHENRY. Thank you, Madam Chairwoman. Chairman Powell, thank you for your leadership in tumultuous times, and this is certainly interesting times internationally, chal- lenging times internationally. Everyone else on the Federal Open Market Committee (FOMC), it seems, has opined about the March meeting. Everyone, whether it is a tweet or an interview or anything else. What are your thoughts going into the March meeting? Mr. POWELL. The March meeting. Okay. Here is how I am think- ing about the March meeting, and I guess I would start, of course, with the U.S. economy, which is very strong. The labor market is extremely tight, and inflation is running well above target. The way we think about our work is we develop working plans for making adjustments to monetary policy over the course of the coming months, and then we are flexible as plans meet the real world. We are never on autopilot, obviously, and at a time like this, what we aim to do is to lay out our principles, and then, with what- ever clarity we do have, proceed to implement them, those policies, carefully and nimbly. Coming into this meeting, let us say before the Ukraine invasion, the Committee was set to raise our policy rate, the first of what was to be a series of raises expected for this year. Every meeting was live. Decisions would be based on incoming data and the evolv- ing outlook. I also expected we would make great progress on our plan to begin to shrink the balance sheet. So, the question now really is how the invasion of Ukraine, the ongoing war, and the response from nations around the world, including sanctions, may have changed that expectation. And it is too soon to say for sure, but for now, I would say that we will proceed carefully along the lines of that plan. VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 9 The thing is, the economic effects of these events are highly un- certain. So far, we have seen energy prices move up further, and those increases will move through the economy and push up head- line inflation, and also they are going to weigh on spending. We are seeing effects on other commodities and perhaps from declining risk sentiment and weaker growth abroad. The thing is we can’t know how large or persistent those effects will be. That simply depends on events to come. This is where that leaves me. I do think it will be appropriate to raise our target range for the Federal funds rate at the March meeting in a couple of weeks, and I am inclined to propose and support a 25-basis point rate hike. We are also going to write down our new summary of economic projection individual forecasts, which will show each participant’s views of the path forward in the economy and with rates. I also ex- pect that at this meeting, we will make good progress toward an agreement on a plan to shrink the balance sheet. We will not final- ize that plan at this meeting. We will do that when we think the time is right at a coming meeting. The bottom line is that we will proceed, but we will proceed care- fully as we learn more about the implications of the Ukraine war for the economy. We use our tools to support financial stability and macroeconomic stability. We are going to avoid adding uncertainty to what is already an extraordinarily challenging and uncertain moment. That is how I would think about it. Mr. MCHENRY. That is very specific. You mentioned 25 basis points. From all of the analysis about what the Fed will do over the course of the next year, is 25 basis points the floor, or the ceil- ing? Is it the speed limit? Is that the max you think that the Fed could take on? How do you think of that? Mr. POWELL. Here is how I think about that. We have an expec- tation, those of us on the Committee have an expectation that in- flation will peak and begin to come down this year. And to the ex- tent inflation comes in higher or is more persistently high than that, then we would be prepared to move more aggressively by rais- ing the Federal funds rate by more than 25 basis points at a meet- ing or meetings. Mr. MCHENRY. You mentioned the balance sheet, a plan for the balance sheet, and that is to come. But what I am hearing clearly from you is that the Fed is very interested in financial stability, given what is happening, and you are willing to make quick deci- sions on a question of liquidity, on a question of market stability, those important works that you have focused on as Fed Chair. And it is actually substantial news for the House to be the first, rather than the Senate, to break news. So, thank you for being so forthright about your views on this. And with that, Madam Chairwoman, I yield back. Chairwoman WATERS. Thank you. The gentleman from California, Mr. Vargas, is recognized for 5 minutes. Mr. VARGAS. Thank you very much, Chairwoman Waters, and Ranking Member McHenry, for holding this hearing. VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 10 And Chairman Powell, thank you very much for being here with us once again. As we look at the unprovoked criminal Russian invasion of Ukraine, one of the most notable national security responses has been the President’s recent announcement to cut off much of the Russian financial sector from SWIFT financial services. Our EU partners have also joined us and excluded seven Russian banks from SWIFT. Chairman Powell, what practical effects would this have on Rus- sia, its economy, its financial sector, and its people? Mr. POWELL. Thank you. I should point out that the Fed does not impose sanctions on other countries that we—in this process of developing sanctions, we are not a principal. That is really a job for the Administration, par- ticularly the Treasury Department. We provide technical back- ground support and things like that, but I think questions about sanctions and their effects generally would be more for the Admin- istration and the Treasury Secretary. I will just add, though, that the effects of the sanctions so far ap- pear to have been significant. Mr. VARGAS. Yes. We saw what happened to the ruble. We saw what happened to the market. The market is still closed. Is cryptocurrency a way around it for them? Could you talk a little bit about that? I know it is a little bit out of your bailiwick. But as you said, these are interesting moments in time. We haven’t had to face this since really World War II. And even all of the comments that you made about inflation and watching the market, so much of it is tied to obviously what the Russians are doing with respect to their un- warranted and criminal acts there in Ukraine. Mr. POWELL. I don’t have any private information on the extent to which that is happening, but that is something you read about and hear about. And I just think it underscores the need really for congressional action on digital finance, including cryptocurrencies. We have this burgeoning industry, which has many, many parts to it. And there isn’t in place the kind of regulatory framework that needs to be there. It was probably no different with railroads or telephones or the Internet. Ultimately, what is needed is a frame- work and, in particular, ways to prevent these unbacked cryptocurrencies from serving as a vehicle for terrorist finance and just general criminal behavior, tax avoidance and the like. I guess that is what I would say there. I don’t really know the extent to which it is happening, although you do hear that and read it in the paper. Mr. VARGAS. It seems like an out for them. Since we did go down this road, could you comment a little bit about a central bank dig- ital currency? It seems like that would be something that would be helpful in situations like this. Mr. POWELL. Yes. We issued a paper. After much thought and many drafts, we issued a paper, was it late last year? I guess it was late last year, seeking public comment on the costs and bene- fits of a potential central bank digital currency issued by the Fed- eral Reserve here in the United States, digital dollars. And we VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 11 await—I think we gave an extended comment period, and we very much look forward to reading those comments. This will be something in which we invest a fair amount of time and expertise and hiring people and things like that to try to get it right, but also to understand whether the benefits actually out- weigh the costs, which I think is an unanswered question, both here and around the world. Nonetheless, it is our obligation to move vigorously to understand the answers to that question so that we can deploy a central bank digital currency if it is appropriate. So would it, in principle? It depends on why people are using unbacked digital currencies. If they are using them to evade visi- bility and evade the law, then for us just to have a law-abiding CBDC won’t change that. They will still be able to use those cur- rencies for that matter. The existing digital currencies that, again, are not backed are really vehicles for speculation. They are not used in payments. They are not a store of value. They are a speculation, like gold. That is what they are used for. Whereas, potentially, a U.S. CBDC would have a wider view. I do want to stress that we have not decided to do it, but we do understand our obligation is to really get to the bottom of it and to understand both the technical and the policy issues that need to be answered. Mr. VARGAS. Thank you, and I know my time is about up. I would just say, from your lips to God’s ears. I hope that inflation does peak this year and does come down because people are hurt- ing. And thank you very much again for your steady stewardship. We appreciate it. Mr. POWELL. Thank you. Chairwoman WATERS. Thank you very much. The gentlewoman from Missouri, Mrs. Wagner, is now recognized for 5 minutes. Mrs. WAGNER. Thank you, Madam Chairwoman. Welcome, Chair Powell. It is good to see you in the chair. We ap- preciate your time and service. Chair Powell, since the last FOMC meeting in January, the glob- al economy has become markedly more complex. Russia’s unprovoked and unwarranted invasion of Ukraine has led to a very steep increase in the price of energy. As of this morning, when I checked, a barrel of crude oil was priced at $112 per barrel, and this steep increase in the price of energy risks pushing U.S. infla- tion potentially even higher. You have touched on this a little bit, but how does the war in Ukraine affect your thinking as you prepare for the next FOMC meeting? Mr. POWELL. I think the first thing again to say is that the ulti- mate economic effects of the war and all of the sanctions and events yet to come are just very highly uncertain, and we need to understand that. And as I mentioned, I think it is appropriate for us to move ahead. Inflation is too high. The Committee is com- mitted to using our tools to bring it back down to levels of price stability, which is to say 2 percent inflation. VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 12 But I would also say that given the current situation, we need to move carefully, and we will. And we will be nimble. We will be looking at the situation as it evolves. And again, we will use our tools to add to financial stability, not to create uncertainty. Mrs. WAGNER. So, at this point in time, you don’t think that it significantly alters your expectations for the rate increases that you have discussed this year? Mr. POWELL. I don’t think that is knowable yet. What we do, what we like to do is to run alternative scenarios, and we have done some of that, as you would expect. And it is easy to find cases where it would affect it. But we don’t know that yet. We honestly don’t, and we will see. Mrs. WAGNER. Thank you. Chair Powell, could you explain the role of the Federal Reserve in implementing U.S. sanctions on Rus- sia, how you are working with the Office of Foreign Assets Control (OFAC), how this actually is implemented? Mr. POWELL. Right. Sanctions are really designed by the Admin- istration. They are a part of what the elected government does. We provide technical support. We implement those sanctions, or we make sure that the banks that we supervise and regulate, obey them. That is one thing that we do. We also consult. We have knowledge about financial markets and financial institutions. So, we are providing technical support, but we are not the decision-makers on those things. And honestly, these are decisions that are made at the level of the elected govern- ment, not at the level of the Fed. Mrs. WAGNER. I know things are happening quickly and are real- time here, but what actions has the Fed taken to date since the in- vasion of Ukraine? Mr. POWELL. I would say, first of all, since late last year, we have been on very high alert for cyber attacks. We haven’t really seen any notable incidents about that yet. We are making sure that the banks we regulate and supervise are also on high alert. We communicate with the Reserve Banks, where there is a lot of exper- tise in these areas, and with other parts of the government. So, that is one thing that we have done. As I mentioned, we are in very close contact with the Treasury Department, as you would expect, between every central bank and every finance ministry around the world. But again, we are not the ones who design the sanctions. Mrs. WAGNER. Okay. Cybersecurity is, certainly for this com- mittee, and especially at the Fed, a top priority. I’m glad that you are watching it closely. Chair Powell, does our U.S. financial system have the necessary capital and liquidity to handle any economic fallout from this war? What kind of data will we be seeing? Mr. POWELL. The evidence to me strongly suggests that the an- swer to that is yes. We just went through a rather enormous shock with the pandemic and the near closure of the global economy, and U.S. banks’ capital levels are at multi-decade highs, as are liquidity levels. It is hard for me to look at that and say that a lack of cap- ital is a threat at this point. VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 13 There are certainly issues. Again, cyber for private financial in- stitutions is a huge issue and one that they spend a great deal of time on, as do we. Mrs. WAGNER. In 2015, the Obama Administration blocked the development of the Keystone XL pipeline, a decision reversed by the Trump Administration. Then, President Biden canceled the permits, again depriving the U.S. of over 800,000 barrels of oil a day. Wouldn’t expanding the supply of oil by 800,000 barrels a day reduce energy inflation and lower prices at the gas pump? Mr. POWELL. We are not responsible for energy policy. That is a matter for Congress and the Administration. Of course, the laws of supply and demand do work. Mrs. WAGNER. The laws of supply and demand do work. I yield back. Chairwoman WATERS. The gentleman from Guam, Mr. San Nico- las, is now recognized for 5 minutes. Mr. SAN NICOLAS. Thank you so much, Madam Chairwoman. Good morning, Chair Powell. And I would like to first recognize one of my senators all the way from Guam, Senator James Moylan. Thank you so much for mak- ing time to join us here today, Senator. [applause] Mr. Chairman, over the course of the uptick of inflation in the last year, you testified before the committee on multiple occasions that the Fed believed that the inflation the country was experi- encing was transitory. And since that time, especially today, there is a seeming change in that tenor. Could you elaborate more on that? Mr. POWELL. Sure. I would be glad to. I think very widely among macroeconomists and other central banks around the world, we looked at it as akin to an energy shock and a supply-side shock. And the textbook on monetary policy would have you look through that because a supply shock comes and goes, and by the time monetary policy is having its effect, which happens with long and variable lags, we think the supply shock is already gone. We looked at it that way. I think we expected to get relief, par- ticularly going into last fall, I would say. We expected when schools reopened, vaccinations were raised, and kids were back in school, we expected the supply of labor to come in, that kind of thing. And it didn’t happen. But it didn’t happen because the supply-side constraints didn’t ease. And it is not like, as a practical matter, what was wrong was not the theory, it was just in reality, the supply-side constraints have been much, much more durable and persistent than we had expected. We knew that we could be wrong, and I always thought we could pivot pretty quickly and catch up, and we started to pivot in the middle of last year and then pivoted hard at the end of the year. But in the meantime, the economy was really healing incredibly quickly over the second half of last year. Record job growth and record declines in unemployment, and record tightening in the labor market. We know that what our job is now, which is to move away from these highly-accommodative settings to more appro- VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 14 priate settings given the very hot nature of the labor market and the level of inflation. Mr. SAN NICOLAS. There is chatter, Mr. Chairman, public chatter that the intensity of inflation that we are dealing with today is a reflection of the Fed not taking policy action soon enough, and not taking enough policy action. And there is public chatter that that causes the Fed’s credibility to come into question as to whether or not it is acting responsibly and appropriately with the datasets that are coming in. And I bring this up, Mr. Chairman, because we have a duty to the American people to be able to raise these questions, as pointed as they are, and to give individuals such as yourself an opportunity to really speak to the credibility question that is out there in the community. So, if you could elaborate further on that? Mr. POWELL. Sure. It is for others to judge many of the things you mentioned, and we understand that. But starting in December, at our December meeting, we began talking about significantly more rate increases. The market took us very much at our word. And as this year has gone on, market participants do appear to be reacting what I would call appropriately to our assessment, our ongoing assessment and reassessment of what is appropriate. And I will just assure you and everyone that we are committed to achieving price stability. We will use our tools to achieve price sta- bility. Really, that is an essential bedrock element of everything else we want to achieve in the economy, including a strong labor market. Mr. SAN NICOLAS. When we faced the financial crisis in 2008, a lot of lessons were learned about the need for the Fed to be more responsive to the liquidity traps that could take us by surprise. Given the circumstances we are dealing with today, and the frus- trations that the American people are facing, can you share with us any lessons that the Fed has learned with respect to its respon- siveness to the inflation that we have been dealing with over the past 12 to 18 months, and the intense inflation that we are dealing with today? Mr. POWELL. The inflation that we are experiencing is nothing like anything we have experienced in decades. It is higher, of course, much higher than anything we have seen since I was much younger. But not only that, it is different. It is coming from the goods sector. The goods sector has been a source of disinflation for a quarter of a century because so many goods, so many manufac- tured goods have been manufactured— Mr. SAN NICOLAS. But just specifically, Mr. Chairman—reclaim- ing my time—what specific lessons has the Fed learned from the outcome that we are dealing with today? Mr. POWELL. We are still living through it. So, the main focus we have is not on doing a retrospective. It is on conducting policy appropriately to return us to price stability while also sustaining the expansion. Chairwoman WATERS. The gentleman’s time has expired. The gentleman from Georgia, Mr. Loudermilk, is now recognized for 5 minutes. Mr. LOUDERMILK. Thank you, Madam Chairwoman. VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 15 And Chairman Powell, thank you for being here, and congratula- tions on your nomination to continue your job for a second term. I think it is well-deserved. Before I get to my questions, I want to hold up something here. This is a Ukrainian dollar. It is a hryvnia. I kept some of these when I was in Ukraine several years ago doing some ministry work, and I think it is interesting to think that what happens in the next few days may determine whether this is another defunct piece of currency and the nation returns to a ruble, or will this maintain some of its value? But as you look at it, you can see it is a fraction, physically a fraction of the size of the U.S. dollar. It takes about 30 of these hryvnias to match a U.S. dollar, but when you look at values, our dollar has decreased in value, as you have mentioned, due to infla- tion. Now a year ago when you testified before this committee, I asked what your outlook was for the economy, and you said you expected economic growth to be strong for the rest of 2021. But at that time, I warned that the $2 trillion stimulus bill that was making its way through Congress at that time was unnecessary and far too big, given that the economy was already recovering. And lo and behold, these predictions came true. In your opening statement, you mentioned that you didn’t expect inflation to continue at the rate it is right now. But I also recall that throughout 2021, we heard that inflation was slight. It was going to be temporary. But I also understand that prediction prob- ably didn’t include the actions and the roles that Congress had, as you had said. According to a report from the Federal Reserve Bank of San Francisco, because the American Rescue Plan was so extremely large and was passed when the economy was already recovering, this was a significant contributing factor to inflation. Do you agree with that report, that our reckless spending is a contributing factor to our inflation? Mr. POWELL. Really, I wouldn’t like to comment on any par- ticular law, but I will say this. All of the things that we did after the pandemic were—we turned our dials as hard as we could. So did you, with the CARES Act. And the economy did benefit from that. We have the strongest economy in the world now. But part of that, no doubt part of what we did and what Con- gress did, without naming any particular laws, is also part of the reason why inflation is high now. Mr. LOUDERMILK. Right. There are multiple contributing factors to that, and the reckless spending, which devalues our dollar, is one of those. And what we heard last night was that there is not going to be a change in the direction this Congress is going or the White House. It sounds like we are just going to repeat the same mistakes we made in 2021. I know that you have the tools for adjusting the interest rate. You mentioned increasing 25 basis points, and you mentioned that it may be necessary to go higher. I understand that. Do you still think that inflation will be temporary, and I believe that you said it would be short-lived going forward because of resolving our sup- ply chain issues? VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 16 But since there are other contributing factors to that, are you an- ticipating that Congress or the Administration will undo some of the failed policies, such as the spending policies and the sup- pressing of America’s energy supply, which has been a significant contributing factor? Let me rephrase that. If Congress and the White House do not change the policies of 2021 and continue down that same path, do you still believe that inflation will stabilize, that price stabilization will come this year? Mr. POWELL. First, we have had this expectation, as you all know, for more than a year, and it hasn’t actually come true. So, we are humble about the fact that we can’t really call with any con- fidence the turn. But it does seem that this year will be with- drawing policy accommodation. Actually, a lot of the fiscal policy spending has happened now, and so the impetus to growth will be declining and, in fact, negative from fiscal policy as it stands now. And just the natural improvement of supply chains and labor supply and things like that, those are the things we are looking to for relief on inflation, that we are hoping for, but it’s very difficult to say when they will happen. And our job is to achieve price sta- bility one way or the other. Mr. LOUDERMILK. Okay. I see I am running out of time. I have several other questions, but I will submit those for the record, and I yield back, Madam Chairwoman. Chairwoman WATERS. Thank you. The gentleman from Illinois, Mr. Garcia, is now recognized for 5 minutes. Mr. GARCIA OF ILLINOIS. Thank you, Chairwoman Waters, and Ranking Member McHenry, for this hearing, and thank you to Chair Pro Tempore Powell for joining us. It has been a challenging year. Rising prices at the gas pump and supermarket cause real distress to working-class families like my neighbors in Chicagoland, and the improvement in employment and wages is real, but not nearly enough. My constituents saw a decade of stagnation after the last reces- sion. Working-class Latinos and immigrants like my neighbors are always hard hit. We simply can’t afford that again. Chair Powell, you have said that inflation has been driven by bottlenecks in the supply chain, and last night, President Biden highlighted their role in corporate concentration and price in- creases. I will note that CEOs from Kimberly-Clark to Tyson Foods had bragged to investors about their power to raise prices without facing competition. And last night, President Biden said, ‘‘Lower your costs, not your wages.’’ And my constituents were glad to hear that. Mr. Chairman, can you explain how raising interest rates will lower prices for diapers or chicken? Last time, it was because my neighbors lost their jobs and couldn’t buy diapers or chicken. Is that the idea? Mr. POWELL. The idea is that right now, the Federal funds rate is still set close to zero, and that is a very stimulative level. I think it is 8 basis points today. That is not an appropriate level, we think, going forward. We think it is appropriate that we engage in VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 17 a series of rate increases over the course of this year and also let our balance sheet shrink. And what will happen then over time is that demand will mod- erate as interest rates get into the economy over time, and these annual price increases in everything where prices are going up will moderate as well. That is how it has always worked with interest rates. We don’t do competition policy. So, I can’t really comment on that part of it, but I will say that is how we think about inflation and that is how we use our tools to get inflation under control. Mr. GARCIA OF ILLINOIS. Changing gears, we discussed corporate concentration, and last July, the President issued an Executive Order on competition that encouraged the Fed and other regulators to increase their scrutiny of bank mergers. It has been a long time since regulators blocked a bank merger, even an acquisition by a global systemically important bank (GSIB) in 2020. Chairman Powell, do you think it is appropriate to issue a mora- torium on pending mergers while the Fed updates its framework for their review? Mr. POWELL. I think we have a statute that Congress has passed that gives us the rules for evaluating potential acquisitions and mergers by banks. I think we have a widely-developed framework for that work, and we are continuing to implement that. Any changes that would come would either come through legisla- tion or through new personnel at the Fed, neither of which we have right now. Mr. GARCIA OF ILLINOIS. As we learned from Wells Fargo, front- line bank workers are an important resource for regulators. They see firsthand how banks implement or ignore internal controls, and they can identify problems as they develop. Incorporating frontline workers’ voices in our banking regulatory system would improve the information we have and diversify the voices that get heard. Chairman Powell, would the Fed commit to adding bank workers to your various advisory councils? Why or why not? Mr. POWELL. That’s a very interesting question. We do have quite a diverse group of people on our various advisory councils, in- cluding people who are representatives of workers. I don’t know that we have outside councils who advise us on bank supervision, per se. But we do always seek out in all of our— in our Reserve Bank boards and also the advisory councils that we do have representation from labor and also from people who live and work and represent the interests of low- and moderate-income communities. Mr. GARCIA OF ILLINOIS. Thank you. I would appreciate it if you would consider that. And Madam Chairwoman, I yield back. Chairwoman WATERS. Thank you. The gentleman from Tennessee, Mr. Kustoff, is now recognized for 5 minutes. Mr. KUSTOFF. Thank you, Madam Chairwoman. And thank you, Chair Powell, for attending this morning. A lot of times, we look for historical references when we try to reference a current event. A number of people, a number of pun- dits, when they look at inflation today, reference it back histori- VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 18 cally to the late 1970s and the early 1980s. From your perspective, is that the proper historical reference to what we are experiencing today as it relates to inflation? Mr. POWELL. That is the proper historical reference for what we are trying not to replicate. Obviously, all of us have looked care- fully at the history of post-World War II inflation and business cy- cles and all that kind of thing. One of the things that is different now is that central banks, including the Fed, very squarely take re- sponsibility for inflation. That was actually not the case in the 1970s. There was a school of thought that really there were certain things that an independent agency just couldn’t do because it was too hard, and that Congress should do it. So now, I think central banks around the world have an inflation target. They have trans- parency so that they can be held to account for it. We are not wait- ing. We are using our tools now to—and that is really different than it was in the 1970s. Also, inflation expectations have been anchored for a long time. They really weren’t then. They were allowed to become unanchored without much of a response. That would not happen in today’s world, and it will not happen. Mr. KUSTOFF. A few weeks ago when the CPI number came out, I was on my way to a breakfast meeting in Jackson, Tennessee, which I represent, and one of my constituents and I, when we were talking about the new CPI number, he said, ‘‘I don’t care what the number is because I know that I am paying 50 percent more in gas than I did 12 and 18 months ago. I know I am paying 20 to 25 per- cent more in grocery prices than I did a year ago. I know what the price of a new car and a used car is.’’ If you were me, if you were a Member of Congress, what would you tell your constituents about the rising costs, the expensive cost to just live today? Mr. POWELL. Inflation is too high. We understand that, and we are working on it. It is going to take some time, but we are going to get it back under control. By the way, we are seeing this everywhere in the world. We are seeing it more in the United States because our economy is strong- er, but we are seeing it everywhere in the world. Mr. KUSTOFF. Let me, if I can, follow up on a few questions that some of my colleagues asked about. Ranking Member McHenry asked you about the next meeting and your plans for the next Fed meeting, and I think you elo- quently laid it out. But you also talked about the situation that has developed in Russia and Ukraine. My inference from your answer is that if Russia had not invaded Ukraine, the Fed would be more aggressive as it relates to the balance sheet and to rate hikes. Is that a proper inference? Mr. POWELL. No, I think that remains to be seen. As I said, we are moving ahead at this meeting, it would be my expectation, in 2 weeks with a rate increase. And we are going to make progress on agreeing on a plan at this meeting to shrink the balance sheet, and I am confident we will. VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 19 The question of when we implement that plan is not answered yet. I don’t think that is clear at this point. That certainly is some- thing that we can’t answer now. Mr. KUSTOFF. Mr. Garcia referenced the President’s State of the Union remarks last night. The President, when he talked about ad- dressing inflation, said that we need to control costs. Did you hear him say that? Mr. POWELL. I did not. I was too busy getting ready for this hear- ing. I did not watch it. Mr. KUSTOFF. I won’t tell the President. Mr. POWELL. I probably just did. Mr. KUSTOFF. When the President said he wants to control costs, or that businesses should control costs to address inflation, would you have any idea what he is talking about? Mr. POWELL. I really can’t comment. Mr. KUSTOFF. Fair enough. In a follow-up to questions from Con- gresswoman Wagner, she asked you about cyber. I know pre-pan- demic, pre-invasion, one thing that you said kept you up at night was a cyber attack. If Russia were to retaliate against the United States in some form of a cyber attack, what degree of confidence do you have in our nation’s banks to thwart a cyber attack from Russia? Mr. POWELL. What I can tell you is that everything that we can do to protect ourselves against cyber, we are doing it. The private large financial institutions are doing it, and they have been for some time. It is very hard to say what is possible to happen, but we are cer- tainly on high alert, and we will continue to be. Chairwoman WATERS. Thank you very much. The gentleman’s time has expired. The gentlewoman from New York, Mrs. Maloney, who is also the Chair of the House Committee on Oversight and Reform, is now recognized for 5 minutes. Mrs. MALONEY. Thank you. Thank you very much, Chairlady Waters, for your leadership and for calling this hearing. Mr. Powell, first, I want to say that at a time when we are still recovering economically from the COVID pandemic, and we are fac- ing challenges at home and now in Ukraine, I think and I feel deeply that the Fed should not be subjected to political stunts in the Senate with boycotts by the Republicans, and the Senate should consider the pending Fed Board nominations as soon as pos- sible. The Fed has an important job to do, and President Biden has put forward qualified nominees, and we need to get this done. That is just my main point. With that said, as you and I have discussed in the past, the eco- nomic recovery has not been even and we still have a ways to go to ensure our economy works for everyone. Just as one example, the Black unemployment rate remains at nearly 7 percent, which is more than double the White unemploy- ment rate, and later today, the House Select Subcommittee on Coronavirus Crisis is having a hearing where we will be looking at the depth of the pandemic’s impacts on child care providers and VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 20 workers and the results that has on our families and our econo- mies. I want to ask you about the monetary policy report the Fed re- leased on Friday. The Fed notes that the labor force participation rate remains well below estimates of its longer-run trend as a re- sult of retirement and people out of the labor force and engaged in care giving activities. From both a macro perspective and a micro perspective, what does this drop in labor force participation mean for the U.S. econ- omy and what does it mean for those workers who leave the work- force to care for their children or family members? Mr. POWELL. Having a lower labor force participation rate now— it is a little more than a percentage point lower than it was—re- flects a lot of retirements, and what it means is that our labor force is smaller. That has consequences, including contributing to the labor shortage that we are seeing across industries and all across the country. If we had a few million more people working, then we wouldn’t be feeling that quite so much. It also means the potential output of the country is lower. Many of the people who are not in the labor force are retirees who have made a choice. But some of them are people who still want to come back, but perhaps can’t, because of childcare activi- ties or fear of COVID or other factors. In any case, the decline in the labor force participation that we have seen has been much larger than that of other comparable na- tions, and it was not something we expected, and it is certainly something that is now contributing to wage inflation and actual in- flation and to the labor shortage that we are currently seeing. Mrs. MALONEY. Thank you. It has been announced that as a result of the Ukraine war and other disagreements, Russia and China are now moving to trade completely in their currency, are no longer using the dollar, and Pakistan has flown in to meet with Russia. There is some talk that they may be part of it. What effect would that have on the U.S. economy if China and Russia no longer use the dollar in certain block trades around the world and with each other? What effect, if any, would it have on our economy? Mr. POWELL. We do benefit from being the main reserve currency for the world, and that really is because we have open capital ac- counts and the rule of law, and we have inflation over a long period of time under control so that the dollar preserves its value. And so, our markets are the most liquid and it is the place where people want to be. Over time, the question is, if some want to move away from the dollar, what will be the effect on us? I don’t think it is something you would feel right away. Over time, they would have to create an economic ecosystem whereby another currency becomes a better currency for them to use. What we can do is we can make the dollar the most attractive currency by continuing to have the rule of law and open capital ac- counts and make it an attractive place for people to invest and to use in their businesses. There wouldn’t be any short-term effect of that. Over time, though, I suppose it would diminish our status as the reserve cur- VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 21 rency. It is also possible to have more than one large reserve cur- rency, and there have been times when that was the case, so it is not really clear. Mrs. MALONEY. Thank you. My time has expired. I yield back, Madam Chairwoman. Thank you. Chairwoman WATERS. Thank you. The gentleman from Okla- homa, Mr. Lucas, is now recognized for 5 minutes. Mr. LUCAS. Thank you, Madam Chairwoman. And to continue several points that a number of my colleagues have raised, as Putin’s aggression in Ukraine has continued to es- calate, the U.S. and its allies have responded in a unified voice to condemn Russia and apply economic pressure. Chairman Powell, could you discuss the difficulty of predicting what the implications will be of locking Russia out of SWIFT? Mr. POWELL. Again, on sanctions, we are not the right folks to ask. We don’t design them. We don’t implement them. That would be, literally, a question for the Administration. Mr. LUCAS. Let me word it this way: How sweeping do you fore- see the ripple effects through the U.S. financial system? Is there an effect on us as those actions take place? Mr. POWELL. With big actions like this, there may well be unin- tended and unexpected effects, and it’s hard to say what those might be. In the economic sphere, not directly to your question, but we are seeing concerns over palladium and neon and corn and wheat— shortages of those, potentially. But it will be difficult to say exactly what the effects could be over time. The United States—our financial institutions and our economy do not have large interactions with the Russian economy. It is a relatively small thing and it has gotten smaller and smaller in recent years. So, there wouldn’t be direct effects from these kinds of things on the U.S. economy. It is hard to say what the second-order effects might be. Mr. LUCAS. Thank you. You have answered my question. As Congresswoman Wagner touched on, the price of oil has con- tinued to climb during the past year to its highest level in more than 7 years, and we now see international banks, appropriately, shunning Russian oil even without energy sanctions. Could you de- scribe the range of different scenarios the Fed projections are play- ing in regard to this, and along with that, how do you see this po- tentially impacting the already-rampant inflation issues? Mr. POWELL. Obviously, the price of oil depends on events that haven’t occurred yet. It really depends on where this goes, going forward. We have seen prices move up, including just in the last couple of days, and they moved up quite substantially since—if you go back 3 months before this incident kind of began. Prices are up quite a bit. The effects are going to be passed through into gas prices, into lower economic activity, and into headline inflation, and the larger the increase, the larger the effect. But the question then will become, is that going to lead to re- peated inflation increases at that time, and that is not necessarily VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 22 the case, and, of course, we would use our tools to make sure that it is not the case. Mr. LUCAS. And, of course, representing the constituency I do, which is both oil and gas production, and agriculture, we take very careful note of how those actions will affect world crude oil prices. And, of course, Ukraine being a very historic major grain producer, my wheat people also are prepared to step up and match that. But it all underscores, I suppose, the increase in energy produc- tion in the United States, and supporting policies that will not pe- nalize or drive capital away from domestic oil and gas production. That is more of an editorial on my part, Mr. Chairman. But I note that we stand ready in this country to replace resources that may not be available or affordable for the rest of the world, and we just need a little incentive and encouragement from this side of the room to utilize those things. My last question in the time I have remaining is, the economy is currently operating in what I think we had all described as, at the very least, massive economic uncertainty. And when you deal with this 40-year inflation, and supply chain issues, and the COVID-related issues—and hopefully, we are in the final stage— can you elaborate on how critical it is for the health of the eco- nomic system to be reliable and to maintain liquid markets so we can navigate through whatever lies ahead of us? Mr. POWELL. Yes. I would say our markets have been functioning well. There is a great deal of liquidity out there. Between our swap lines, and our repo facility with other foreign central banks, and our standing repo facility in the Treasury market, we have institu- tionalized liquidity provision, and I think just the knowledge that is there will help support good market function which, despite all this volatility, we still have. Mr. LUCAS. Thank you, Mr. Chairman. I will yield back, Madam Chairwoman. Chairwoman WATERS. Thank you. The gentlewoman from New York, Ms. Velazquez, who is also the Chair of the House Com- mittee on Small Business, is now recognized for 5 minutes. Ms. VELAZQUEZ. Thank you, Chairwoman Waters. Chairman Powell, thank you for being here today. Given what you said about the upcoming meeting in March, and the illegal invasion of Ukraine, how is the Fed coordinating with other central banks around the world and accounting for their ac- tions when considering adjustments to interest rate policy here at home? Mr. POWELL. We are in ongoing contact, it is fair to say, with our major central bank colleagues, and we actually have a meeting of all of them on Monday morning. It is a virtual meeting at 7 a.m. on Monday. It is something that we do regularly. That said, we conduct mon- etary policy to achieve domestic objectives, specifically, here in the United States, maximum employment and price stability, and that is what we use our tools for. But of course, foreign events are very much top of mind right now, and it is enormously helpful to understand the perspectives, particularly, of the Europeans who are so much closer physically to what is going on. VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 23 So, that is an important channel for us. Ms. VELAZQUEZ. Thank you. And, Chair Powell, last week the Fed published its 2022 Small Business Credit Survey. Among other things, the report found that small business applicants that used online lenders for their financ- ing needs reported more challenges with their lenders than did ap- plicants at other sources. The top challenges faced by borrowers from online lenders were high interest rates and unfavorable repayment terms. Can you ex- plain the report’s findings and what it could mean for small busi- nesses that utilize online lenders to satisfy their financing needs? Mr. POWELL. If I recall that survey, it did raise some interesting questions, and our people looked at it and actually saw differences in data gathering. It is not clear that the data in the two surveys was comparable. But I do think it raises interesting questions, and we will be happy to get back to your office on that. Ms. VELAZQUEZ. And it might raise some interesting questions where we, through legislation, could provide some relief and regu- lations so that small businesses are not shortchanged when it comes to the most important element for any small business: access to capital, affordable capital. Chair Powell, during public remarks last month, Acting Comp- troller of the Currency Hsu stated that in the not-too-distant fu- ture, the OCC, the Fed, and the FDIC will issue a joint notice of proposed rulemaking (NPR) to update the Community Reinvest- ment Act (CRA). Does the Fed also believe a joint NPR is possible, and when do you expect it to be released? Mr. POWELL. Yes, we do. We think that will be ideal, and we are working very closely with the OCC and the FDIC to come up with a consensus notice of proposed rulemaking reflecting all of the com- ments that we got on our advance notice of proposed rulemaking (ANPR). I think the timing is soon. I wouldn’t want to put a specific date, but I know that we are going back and forth and it feels like we are getting very close. Ms. VELAZQUEZ. Right. Thank you. And, Chair Powell, a note published by a Credit Suisse strategy over the weekend warns that a decision to exclude certain Russian banks from the SWIFT system, which I support, could result in missed payments and giant overdrafts with significant con- sequences for money markets, thereby forcing the Fed and other central banks to intervene to enhance liquidity to offset missed payments. Do you see this scenario as likely? Mr. POWELL. No, I don’t see that as likely. Of course, we always appreciate looking at different risk scenarios. But, again, given the relatively modest exposure that our banks have directly to Russia, and given the existing tools that we have to provide liquidity, I don’t see that as a likely outcome. Ms. VELAZQUEZ. Okay. Thank you. I yield back. Chairwoman WATERS. Thank you. VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 24 The gentleman from Texas, Mr. Sessions, is now recognized for 5 minutes. Mr. SESSIONS. Madam Chairwoman, thank you very much. Chairman Powell, thank you for not only taking the time to join us today, but for your insights into monetary policy. The monetary policy report of February 25th, seemingly still hot off the press, brings about, I think, a good review of the Fed’s anal- ysis of where we are, and I know there is that temptation by Mem- bers of Congress to hold you accountable for things which are not within your purview. But on page 3 of your February 25, 2022, monetary report, you talk about special topics like low labor supply. Next, it goes to sev- eral other issues, and then, supply bottlenecks. As a Member of Congress from Texas, both of these are high- lighted to me on a daily basis as I receive feedback. This is infla- tionary also. We have taken a bit of time with you to probe with you your ideas that, I think, you have handled professionally on behalf of yourself and the Fed—the issues related to energy. But the bottom line is, we can’t get people back at work. We find that turns into a low labor supply and then we have bottlenecks. These are all hand in hand, glove in glove, together, in my opinion. I took a few minutes just now to look at the labor unions and teachers’ unions. But let us move to the Federal Government. Where is the Federal Government in terms of their employees com- ing back to work now, according to the Office of Personnel Manage- ment (OPM)? Mr. POWELL. I don’t know. We are an independent agency. I will tell you where we are, which is we are in the middle of that proc- ess, probably closer to the beginning than the middle. Mr. SESSIONS. I know you are but, you see, if they don’t come to work, then others don’t come to work. So, I think your point and my point is well made. I believe that what we need is your robustness, not just your acu- men, in these issues and your robustness within the Administra- tion to actually let them know that for this report—for monetary policy to be correct, that you believe inflation is a short-term mean- ingful hindrance on our economy. They, meaning the White House, are going to have to make pol- icy. They are going to have to understand what caused this. And I think that this Administration, and I think the Democratic Party, and I think this Congress, have made friends with inflation to en- courage it, and that if your prognostication is going to come forth that we end this inflation, we are going to have to have serious changes. Because right now in Texas, which has been relatively open, I don’t see relief on the horizon, and I think that this Administration and this Congress have a lot to do with it. Without chastising you, I meant to help you. I would like for your voice in this Administration and within the halls of Congress, perhaps doors that are shut, for them to understand that they have actually made friends with and are continuing inflation, whether it be with teachers unions or whether it be with OPM, and we have to get serious about getting people back to work, because as you VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 25 tap down the amount of money that is put in the economy, as that moves, we’re going to have to correspondingly have people come to work who pay taxes that move the economy. Gross domestic prod- uct (GDP) is a term we used earlier today. It is shifting this big, massive task. I have almost a whole 30 seconds left. But I would like you to say to you that I would like for your voice of reason, of prosperity, a future, to come true as you would like. Did I ask you a question? Okay. I am going to support you. I am for you. How can we help you? Mr. POWELL. Honestly, we have the tools and we will use them to get inflation under control. But to the extent we get help from the supply side, it will make that job so much easier. It is about labor force supply. It is really about supply constraints and shortages and that kind of thing. It is also about exogenous events, like a war, which will drive up the price of oil and gas, and that will get into prices, certainly, and we will make sure that it doesn’t provoke a cycle of inflation. Mr. SESSIONS. This is what happens when you have to rely on other people for your food, cheese, and energy. Thank you very much, Mr. Chairman. Chairwoman WATERS. Thank you, Mr. Sessions. You can help Mr. Powell by asking your friends on the Senate side to confirm his appointment. [laughter] Chairwoman WATERS. The gentleman from Georgia, Mr. Scott, who is also the Chair of the House Agriculture Committee, is now recognized for 5 minutes. Mr. SCOTT. Chairman Powell, how are you? Mr. POWELL. Fine, thank you. How are you, Mr. Scott? Mr. SCOTT. I want to sound the alarm here this morning, and I want you to listen to me, and I want the nation to, because I am the Chair of the House Agriculture Committee, and I am very wor- ried about this turmoil over in Ukraine, and Russia’s violent, ille- gal, and criminal actions that they are taking and the impact that this has on global trade and, most importantly, our own food secu- rity. We could very well be on the verge of a hunger crisis all over this world. I want to share with you, and with the nation, some re- search so that we can understand what this Ukraine-Russia situa- tion is causing. Today, Russia alone is producing more than two-thirds of the 20 million metric tons of fertilizer used to grow corn and wheat around the world—one country producing 66 percent of the fer- tilizer that is needed. And when you combine Ukraine and Russia, these are also the two largest exporters of wheat, corn, and barley, producing a quar- ter of the world’s wheat in these two countries, making this impact a crisis of soaring magnitude when you have this much, and these two countries are warring with each other. I want to sound the alarm on this. Chairman Powell, the disrup- tions and rising prices from these commodities will destabilize glob- al food markets and threaten our food stability and social stability. VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 26 My question to you, Chairman Powell, is to what extent could these developments create a financial stability risk here at home and abroad, and what must we do? We can go without a lot of things in this world, but the one thing we cannot go without is food. And when you have this much power on our food security for the world in the hands of these two countries warring each other at this time, what can you do about it? Mr. POWELL. I think your point is very well taken and I think it is shipping, it is corn, it is wheat. As you pointed out, it is fer- tilizer, and we see that getting into food prices and into the food supply just in these early days after the sanctions that have been put in place in a war less than 2-weeks-old now. The Fed doesn’t really have the tools to address this. This is real- ly a matter for Congress and the Administration, I think. But you are right to call attention to it, and I do think that it is understood that help will be needed here. Mr. SCOTT. I just want to say that we cannot allow the world to get into this desperate situation. So, I am giving this as sort of a Paul Revere moment here. I am not saying the British are coming, but I am saying the Russians are already at the door, and they could cause worldwide hunger, and I hope that free nations around the world can come together and realize that this is not just Ukraine’s fight. It is our fight and we have to win this fight, and hopefully, we can get more of our nations to come together and end this situation in Ukraine and Russia before it causes, truly, a worldwide war. Chairwoman WATERS. Thank you very much. The gentleman from Florida, Mr. Posey, is now recognized for 5 minutes. Mr. POSEY. Thank you, Chairwoman Waters. Chair Powell, when your former Deputy, Mr. Quarles, came be- fore the committee last May, I pointed out to him that just a week before, the April inflation rate had been recorded at 4.2 percent, much higher since 2009. The rate in March of 2021 had been only 2.6 percent. I asked him if we were paying the price for monetizing a huge Federal debt, what the late Dr. Friedman and former Chairman Bernanke both called, ‘‘helicopter money.’’ Mr. Quarles told me that he didn’t believe the Federal Reserve was monetizing the debt. Mr. Chairman, looking back a year, does the Fed continue to deny that it has been monetizing the debt, and do you believe that you should have acted before now to rein in the inflation, rather than let it now exceed 7.5 percent, the highest rate since 1952? Mr. POWELL. I think by monetizing the debt, what that means is for the central bank to purchase the debt with the intention of holding it, and that is not the intention here. We are about to start shrinking the balance sheet and we will return the balance sheet to a size relative to our economy that it was before. Also, that is not at all our intention. We purchase longer-term se- curities in order to drive down longer-term interest rates to support economic activity. I would also say that is not really what we think of as the source of inflation, admitting that inflation, proclaiming VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 27 that inflation is far too high and that we are committed to using our tools to get it back down. It is really about very, very high demand, particularly in the goods sector, related to a spending shift that happened in the pan- demic and supply constraints that we didn’t foresee—international supply chains, labor constraints, low labor force participation, right across the economy. It is a very different kind of inflation story than we have had in the past, but it is one that we have to deal with, and we will deal with it. Mr. POSEY. Chair Powell, when you appeared before this com- mittee in March of last year, and I asked you to clarify the purpose of the Federal Reserve collecting data and employing stress tests related to climate change, you assured us that the Federal Reserve would be collecting the information to help financial institutions learn about climate risk and wouldn’t be using the information for regulatory purposes. In recent weeks, considerable controversy has emerged in the confirmation process to fill four vacant seats on the Federal Re- serve Board. One of the nominees has a record of advocating for ag- gressive Federal Reserve regulation related to climate change, in- cluding actions that would regulate capital allocation away from fossil fuels. I won’t ask you to comment on the confirmation process. But can you continue to assure us that the climate data—the stress test proposed by the Federal Reserve won’t be used for regulatory pur- poses and driving investment away from traditional energy sources here? Mr. POWELL. We call them climate stress scenarios, and we haven’t—we are actually just building the capability to do this, and the idea is not to use them in the way that we use the traditional stress tests to set capital levels, in effect. The idea is more to allow financial institutions and also regulators to better understand the extent to which and the ways in which climate financial risks have any implications for the banks. That is the purpose of it. I will add, though, that we don’t think it is our job to tell banks which legal companies they can and can’t lend to, and I don’t see that as an appropriate role for us. Mr. POSEY. I am really glad to hear that. So, that is an absolute, unequivocal—a guaranteed answer that the data will not be used for regulatory purposes in any way whatsoever? Mr. POWELL. I can just say that, first of all, we are not even doing the tests yet—those scenarios yet. But, certainly, that is not going to be their construct. They are going to be—the construct will be what I said, which is to help us understand better, not to set capital or otherwise put on further regulatory requirements. Mr. POSEY. Thank you so very much. I deeply, deeply appreciate that, and I yield back. Thank you. Chairwoman WATERS. Thank you very much. The gentleman from Colorado, Mr. Perlmutter, who is also the Chair of our Subcommittee on Consumer Protection and Financial Institutions, is now recognized for 5 minutes. Mr. PERLMUTTER. Good morning, Mr. Powell. How are you? Mr. POWELL. Fine. How are you? VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 28 Mr. PERLMUTTER. I am good. And I just want to thank you. You have been getting picked on, on inflation. But I would like to start with chart one of your book. I always ask about your charts be- cause I love them. And chart one shows a tremendous growth in employment, and chart two shows a tremendous drop in unemployment—the con- verse of it—and it has dropped from about 14 percent to 4 percent. Do you think that the Fed’s monetary policy helped in reducing the unemployment rate? Mr. POWELL. Yes, for sure. Mr. PERLMUTTER. Two years ago, we were going into a pandemic. You and I had a conversation about the potential for a worldwide recession of a magnitude we had never seen. Did we hit that? Did we get that recession? Mr. POWELL. No, we didn’t. Mr. PERLMUTTER. And you may recall, I am a bankruptcy lawyer, so I look at things kind of with a pessimist’s eye. I expected many, many bankruptcies. Did we have those? Did we have the bank- ruptcies that we thought we might get? Mr. POWELL. We sure didn’t. Mr. PERLMUTTER. Do you have any idea how much the gross do- mestic product has grown in the last year? Mr. POWELL. I want to say five point something percent. Mr. PERLMUTTER. It is actually more than that, and one of your charts has that—I think it is on page 23, chart 14. From 2020 to now, it went from less than $17.5 trillion up to $20 trillion. So, it is substantial, about 15 percent. Now, I don’t think it is that much, but it is substantial. Did we expect that when we went into COVID? Mr. POWELL. You mean since the trough? Mr. PERLMUTTER. Yes. Mr. POWELL. I was just giving you the last year. As you know, we were looking at some really bad scenarios and hoping they wouldn’t happen in the first half of 2020. Mr. PERLMUTTER. The Fed took some pretty dramatic actions, as did central banks around the world, did it not? Mr. POWELL. Yes. Mr. PERLMUTTER. And the Congress, led by the Democrats, took some pretty substantial and dramatic steps, including the CARES Act, the American Rescue Plan, the infrastructure bill, to build a better America and to help us get out of what looked like it could be a tremendous recession. I could ask you, did it not, but I am not going to lead you in that one. But what I do want to talk about is the fact that despite the one flaw that Republicans can find, which is inflation, we have lower unemployment, and a bigger economy. Do you know how many other countries have higher inflation around the world than America? Sixty-four, according to trade economics inflation of coun- try by country. This is a worldwide phenomena, is it not? Mr. POWELL. Yes, it is. Mr. PERLMUTTER. I want you to take a look at a couple more of your charts, because I think these are probably the most impor- tant, and they are the median wage growth found in chart C on VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 29 page 12, and the change in the price index for personal consump- tion found on page 13, diagram 8. According to your chart on page 12, the bottom order of wage earners have had their wages increase by almost 9 percent. Do you see that? Mr. POWELL. Yes. Mr. PERLMUTTER. And the bottom, the next quarter, by 61⁄ 2 , 7 percent. Do you see that? Mr. POWELL. Yes, I do. Mr. PERLMUTTER. And then, you look over to the next page and we are running, I think you said, at about 5, 51⁄ 2 percent inflation. So, wage earners in the bottom half are making more money than they are, potentially—if I do the math, they are making anywhere from 8, 9 percent against a 5 percent increase in costs. Now, it is not apples to apples. Wages are going up, are they not? Mr. POWELL. Wages at the bottom, in the bottom quartile, have gone up in real terms. I do not think that is true for the second, third, and fourth quartiles, but it is true for the bottom quartile that their wages—nominal wages—have gone up more than infla- tion. Mr. PERLMUTTER. Okay. Last question, when you and I spoke at the beginning of this year—my time has expired, so I will ask it to you later on. And I thank you for your service, sir. I thank you for keeping us out of a recession. I think we built a better America by staying out of a recession. I yield back. Chairwoman WATERS. Thank you so much. The gentleman from Ohio, Mr. Davidson, is now recognized for 5 minutes. Mr. DAVIDSON. Thank you, Madam Chairwoman. And thank you, Chairman Powell, for coming here, and I also ap- preciate your book and the work and, frankly, just yet, again, I want to highlight the really heroic work that the Federal Reserve did to create stable markets, particularly in March and April of 2020. Since then, of course, there have been a lot of economic distor- tions, one of which is the ongoing inability of the Federal Reserve to stabilize its own balance sheet, which is now over $9 trillion. I appreciate Mr. Perlmutter highlighting some of the good news and, frankly, I am positive that he has previously operated a lem- onade stand because he can always make something good out of the lemons. But the concern is that in the long term, this has come at the expense of sound money. Just over a year ago, I talked to you about sound money, and does the U.S. dollar represent sound money, because many of us anticipated that inflation was not tran- sitory and that the quantity theory of money might have some im- pact on inflation. So, in light of the fact that we have seen substantial change in the rate of inflation now versus what was showing up then but was anticipated, do you still think that the U.S. dollar is sound money? And either way, what are the threats to the U.S. dollar as sound money? VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 30 Mr. POWELL. The U.S. dollar is sound money. Yes. The threats to the U.S. dollar as the reserve currency, really, in the near term are—to displace the U.S. dollar as the reserve currency, if that is your question, you need to be a very attractive place to hold large amounts of reserves. Mr. DAVIDSON. It is really different than that because we are probably still going to be the reserve currency since the world grades on a curve, and frankly, the planet has never had this much debt since World War II. All of the countries around the world did similar things. We weren’t even—the discipline of the Bretton Woods era was gold. I don’t know that there is magic just in gold but there is magic and discipline. If you look at sound money being defined by a stable store of value, an efficient means of an exchange, and a trusted record of account, you have at least taken some things on store of value. And as you have seen people decide to filter transactions, and de- velop technology and regulatory frameworks that are intended to be able to filter transactions, it is not as trusted or efficient as a means of exchange or a record of account. And so, those kinds of things. Not so much, do we do okay on the curve, but is it truly sound? Mr. POWELL. I am not sure I followed the last part. But I do think that—look, inflation is indisputably too high. We are using our tools to bring inflation back down to levels of price stability and we will accomplish that task. Longer-term, the U.S. dollar is easily the best currency and it is because of what I just said. It is also because of the rule of law and the fact that we are the incumbent, and as long as we observe the rule of law and keep the dollar relatively—keep inflation low and predictable, that will remain the reserve currency. Mr. DAVIDSON. Okay. Thank you, Mr. Chairman. And, look, historically, there have been multiple reserve cur- rencies and, generally, when something loses its status as a reserve currency, it is not just because of other things that unfold but it is because the value is debased. And we can come up with fancy words like modern monetary theory or quantitative easing or simi- lar to quantitative easing but not really the same. When the Federal Reserve’s balance sheet is growing, in a way, it represents the Fed as the lender of last resort. We are not con- strained by the taxes we collect. We are not even constrained by the amount of money the world will lend us. We are constrained only by the will of Congress to not spend more, and what are you going to do, not cover the prolific spending by Congress? Moving on, just talking about the Fed’s role, of course, stable prices is really only one component. The other is full employment. And I wonder if you think in light of Mr. Perlmutter’s reference to chart 2, if chart 4, which is the labor force participation rate, trends the right way, and as you link to the next thing as a regu- lator, there is a lot of pressure for you to do ESG. What can the Fed do and what does Congress need to do to strike those balances? Mr. POWELL. Relative to ESG? VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 31 Mr. DAVIDSON. And full employment. Mr. POWELL. Well, full employment, I think, most members of the FOMC now think we are at labor market conditions that are consistent with maximum employment. Mr. DAVIDSON. With 60 percent labor force participation? Sixty- two? Mr. POWELL. The maximum employment can never be higher than the level that is consistent with price stability. Chairwoman WATERS. The gentleman’s time has expired. Mr. POWELL. I think we are at that level, at least. Mr. DAVIDSON. Thank you. Chairwoman WATERS. The gentleman from Illinois, Mr. Foster, who is also the Chair of our Task Force on Artificial Intelligence, is now recognized for 5 minutes. Mr. FOSTER. Thank you, Madam Chairwoman. And I would like to add to Representative Perlmutter’s list of your triumphs, the record level of small business formation. And I think that when you try to preserve the very strong economic re- covery, I realize you have a dual mandate, but keep an eye on that one, too. It is one of the most important successes we don’t talk about enough. Do you remember the misery index? Mr. POWELL. I do. Mr. FOSTER. Yes. And when unemployment drops from 14 per- cent to 4 percent, so dropped by about 10 percent, and then the in- flation goes from about 2 percent to 7 percent, so up by 5 percent, does that mean the misery index is increased or decreased? Mr. POWELL. It would be decreased. Mr. FOSTER. Thank you for that. You actually mentioned repeatedly that the inflation problem was, largely, one of goods and not so much one of demand, and also of labor shortage. Can you make any rough estimate of what frac- tion of the inflation we are seeing was due to sort of those three effects? Mr. POWELL. I should be clear. Inflation is also too high in the service sector. I wouldn’t want to oversell that. But the really big change has been in goods, which had negative inflation or close to zero inflation for 25 years. I don’t have off the top of my head the ability to just tell you what the contribution of that is, but it is big, and it is a significant part of it. A lot of it also is energy, which is— Mr. FOSTER. Obviously, it’s a worldwide problem. Mr. POWELL. Yes. Mr. FOSTER. If you could get back to me with something a little more quantitative from your staff on that, I would just be— Mr. POWELL. I would be glad to do that. Mr. FOSTER. —interested in knowing your estimate. Now, in terms of the labor shortage, back in the days when we had a different Senate, they passed comprehensive immigration re- form that was then, of course, blocked by Republicans, and many studies at the time indicated it would be a huge positive for our economy to pass comprehensive immigration reform, and that was at a time which didn’t have an extraordinarily-tight labor market. VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 32 Is there anything you can think of that would invalidate those studies which showed that comprehensive immigration reform in both the low-skill and the high-skill sectors would be a huge plus if it was passed? Mr. POWELL. If I can answer that this way, if you look back at the trend, let’s say, 5 years ago, in that range of immigration— legal immigration—people coming in, and look where we are now, we are now several million people, many of whom would be in the workforce, short of that. So, lower immigration is definitely part of the story of the labor shortage. But that is what I would say. Mr. FOSTER. Is there anything quantitative you can say about the timescale for unwinding the balance sheet? Do you think of this in terms of a fixed timescale that we want to go back to normal in the next 2 years or 3 years? Or do you say we are going to take it down by 1 percent a month? Or do you anticipate some sort of feedback loop where we look at the taper tantrums or the equiva- lent and sort of adjust it as you go? Mr. POWELL. The way we did it last time is we set a cap on the amount that will run off, and anything above that gets reinvested for both mortgage-backed securities (MBS) and for Treasuries. We haven’t had that discussion at the Committee. We will have it in 2 weeks. But I guess it turns out that the level of the cap doesn’t really matter that much for how long it takes. Something in the range of 3 years to get back to where you are trying to get to and the way we define is the end. We look at the size of the economy and the size of the banking system and we ask, what is the level of reserves that we will need at that point? And we set a course for that place, and then as we start to get close to it, we might slow down a little bit, as though it were an airplane, and that is the way it will work. But I think something in the range of 3 years to get back to what the balance sheet needs to be, which is basically reflective of the public’s demand for our liabilities plus a buffer and what we call ample reserves. Mr. FOSTER. Yes. Do you have an estimate for how many hours of your life have been spent attempting to explain the difference between quantitative easing and monetizing the debt to Members of Congress? [laughter] Mr. POWELL. No, sir. Mr. FOSTER. Okay. Now, one of the most valuable functions of that is to provide the emergency assistance to the financial systems of the free world and you mentioned that you stood ready. Are there specific things you are worried about in Eastern Europe, where the economies are more tightly tied to Russia, where you may really have to step in and get involved? Any specific worries? Mr. POWELL. What we are watching is the global markets and the dollar funding market and we are seeing markets that are functioning, and, of course, we have tools and we have things in place to deal with stresses should they emerge. That is really what we are doing, and, as I mentioned, markets are functioning, so we haven’t had to deploy any of those tools. VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 33 Mr. FOSTER. Thank you. And my time is up. I yield back. Chairwoman WATERS. Thank you. The gentleman from Missouri, Mr. Luetkemeyer, is now recognized for 5 minutes. Mr. LUETKEMEYER. Thank you, Madam Chairwoman, and wel- come, Chairman Powell. It’s good to see you again. We are in the middle right here of a really disastrous situation with Ukraine, and part of the approach to corralling the Russian advance there is on the financial side. And it would appear to me that we probably didn’t do this as quickly as we should have. It didn’t look to me like we had a plan. If we really wanted to get involved financially, we should have been sitting here saying whenever—when they move the first bat- talion or regiment or whatever you want—amount of troops you want to talk about on the border we should sort of said something, well, okay, if you move another one there, we are going to start doing things to you. And we didn’t do that until they started to in- vade, and then now, all of a sudden, we are playing catch up. That begs the question, we know that China is watching all of these actions very, very carefully. They are looking at what Russia does, how we react, what we do, how the rest of the world reacts, what they do. To me, we need to be sitting here as a country, as the Fed, as Members of Congress, saying, we need to be ready for the Chinese when they invade Taiwan, because I see no reason why they will not do that shortly. If we don’t prepare for that, shame on us. My question to you is, are you beginning to think about what kind of actions you would take or support or suggest to the Administration, should China take over Taiwan or attempt to do that? Because this is going to be a completely different scenario be- cause of the size of China, the size of the military, the size of Tai- wan, versus getting into Eastern Europe. So, it is kind of a large question, but would you like to jump into it? Mr. POWELL. Those questions are really questions that are dealt with at the National Security Council and the Defense Department and the intelligence agencies and the Treasury Department. We are interested students of all that, and we have our technical expertise that we can contribute. But honestly, we are not— Mr. LUETKEMEYER. Mr. Chairman, I listened to you very care- fully a while ago, and you made the comment that you are looking at making policy for anticipated situations in the coming months with regards to a number of things—what happens with the econ- omy, what happens with inflation. So if you are not doing that—I understand you may not want to tell me today because that will be helping the Chinese who are probably watching this right now. I understand that. But just a sort of a wink and a nod to say, yes, we are looking at that would, certainly, be not—it will give us a level of comfort to know that we are not going to be behind the eight ball again. Mr. POWELL. As I also mentioned, we do model alternative sce- narios of various kinds and in fact, with every Tealbook, which is our document that we use at the FOMC, we run half a dozen of VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 34 them in great detail. Our people study those and it helps them think about alternatives. So, I will just leave it at that, if I could. Mr. LUETKEMEYER. Okay. Thank you. I will let you off the hook on that one. With regards to inflation, we have talked about it significantly here today, and I think sometimes that you are given way too much credit for it, and given way too much criticism for it. I think that there are a lot of things that are outside your control that happen that, basically, affect inflation, and you have to react to it. You don’t make monetary policy on the Administration side. You don’t make legislative policy for the legislative side. And, yet, you have to react to all of those things. I am the ranking member on the House Small Business Com- mittee, and I had an economist come in to talk to our committee the other day, and I asked him to break down the different causes of inflation. And I said, let me identify, at least, what I think are four signifi- cant costs. One is money supply—the amount of money that is pumped in either through Fed actions or through our actions as Congress—regulations, supply chain/workforce situations, and en- ergy. And he broke it down like this, and he had some charts and he started going off, and I said, just give me the percent. And he said, roughly 40 percent through the money supply—the money that goes in as a result of Fed actions or congressional actions, 1 per- cent is regulations, 20 percent supply chain, and 20 percent energy. If you look at that—I know Mr. Foster a while ago was looking for some answers so, hopefully, I have helped him with his ques- tion—if you look at that, basically, you don’t have a lot of control over regulations. You don’t have a lot of control over supply chain and no control over energy policy, and money supply if Congress gets involved and passes these massive bills and throws a lot of money in there, you don’t have control of that one either. So, the amount of control over this is just probably in the neigh- borhood of 20 to 40 percent at best. My concern is that when you say that you are trying to help things with inflation, it really bal- ances—it goes back to the Administration and to us as Congress. The Administration, the first thing it did was to stop the pipe- line, stop oil drilling, and prices went up, and that right there is 20 percent. So, it is important, I think, that we understand that. I would like for you to comment on that, if you would, just for a second. Mr. POWELL. Sure. Yes, that’s an interesting breakdown. We can continue this discussion. We would have a little different assess- ment. I would just say that we welcome—this is a lot about supply-side issues, and we welcome any help we can get on that, and we are looking for help from an improved supply side. Mr. LUETKEMEYER. Okay. Chairwoman WATERS. Thank you very much. The gentleman’s time has expired. The gentleman from Florida, Mr. Lawson, is now recognized for 5 minutes. VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 35 Mr. LAWSON. Thank you, Madam Chairwoman. And Chairman Powell, welcome to the committee. Before I ask my question, I have a statement. They said one of the benefits of inflation is that you can live in a more expensive neighborhood without moving, and I thought that was a very inter- esting statement I was seeing— Mr. POWELL. That is a good one. Mr. LAWSON. —and I thought I would bring it to your attention. According to the recent analysis of branch closures by the Na- tional Community Reinvestment Coalition, between 2017 and 2021, banks have closed as many as 7,000 branches across this country, one-third of which were in low- and moderate-income communities and neighborhoods of color. To what extent is the Fed considering these banks as it is con- templating reform to implementing and stressing the Community Reinvestment Act (CRA) and the importance of those banks’ branches for a nearby community? Mr. POWELL. I do think that is a focus of the CRA and also of the focus that we want to strengthen in our proposal that is out for comment. Actually, it is now—we have had the comments and we are getting ready to put out a notice of proposed rulemaking. But we do understand the importance of presence in the commu- nity and service to the community, and those things do go into our CRA assessments. Mr. LAWSON. Okay. Mr. Powell, according to the latest forecast from Goldman Sachs and the Federal Reserve, which raised interest rates more than ex- pected this year due to high inflation and the labor market ap- proaching full employment, can you speak more on this? Should we expect the Fed to raise interest rates at all in the meeting this year, and what should we expect the Fed’s main rates to be by the end of this year? Mr. POWELL. Yes. The inflation is running well above our target. The labor market is extremely tight. The economy is growing strongly and our policy rate—we do expect to move our policy rate up in a series of rate increases this year, away from the very low setting that we put into place during the acute phase of the pan- demic and to a more appropriate level, given the fast recovery and the strong recovery that the economy has had, and given the fact that inflation is running so far above our target. We do expect that will be appropriate. We have communicated that transparently and clearly, and markets have accepted it, and it is our plan to return to price stability while also supporting con- tinued expansion. Mr. LAWSON. Okay. I wanted to make sure that I understood the statement that was made earlier. With wages going up, as they say, and the bottom half are making more in earnings, do you think that we are in a better situation to deal with inflation now than we have been with inflation in the past? Mr. POWELL. I think that this inflation is substantially higher than anything we have seen since I was in college 50 years ago. This is strong and high inflation, and it is very important that we get on top of it and that is exactly what we are going to do. VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 36 I would say this: The labor market is extremely strong. From that standpoint, I do think we are in a good place from the stand- point of trying to get inflation under control. Workers are still going to be getting good jobs and pay increases for some time. So, the economy is strong, and that means the economy can take the rate increases that we are going to be making. Ultimately, we need to get demand and supply back in alignment so that we can get inflation back to a more appropriate level. Mr. LAWSON. Okay. Thank you, sir. And with that, I yield back, Madam Chairwoman. Chairwoman WATERS. The gentleman from Michigan, Mr. Huizenga, is now recognized for 5 minutes. Mr. HUIZENGA. Thank you, Madam Chairwoman, and Chair Pow- ell, I appreciate this opportunity. I am actually going to pick up on what my colleague from Florida was just talking about, and add that to what my colleague from Missouri, next to me here, was talking about. And you may have said that the 40/20/20/20 ratio that came from Douglas Holtz-Eakin, breaking that down to about 40 percent of inflation being tied to monetary policy and spending, 20 percent to regulations, 20 percent to energy policy, and 20 per- cent to supply chain—you might disagree with that, is what you had said. But do you believe that spending has contributed to the situation that we are in now? Mr. POWELL. I may have misunderstood what your colleague said. Mr. HUIZENGA. Madam Chairwoman, I ask that you suspend— I think Mr. Lawson still has his microphone on, and we are getting a little crosstalk, so if we can maybe add a few seconds back here? Chairwoman WATERS. Okay. Is the gentleman muted now? Mr. HUIZENGA. Clearly, he is not. Chairwoman WATERS. I think you can resume. Mr. HUIZENGA. Okay. I would ask that you have a light gavel at the end of my time here. I think we were having a little crosstalk, if we could go back on that. Chairwoman WATERS. Yes. Mr. POWELL. I may have misunderstood. I thought that the 40 percent was money supply, but you made it sound more like mone- tary policy. Look, we can discuss those numbers, but that makes more sense to me. Mr. HUIZENGA. But the point being, has spending contributed to inflation? Mr. POWELL. Yes. I think a number of factors have, including monetary policy. Mr. HUIZENGA. I would agree with that, and frankly, many of us have sort of warned or talked about this situation. We have record debt right now, previously without conflict. Now, war and rumors of war that we hope are not going to happen may even increase that debt. And I am afraid that our spending habits are putting you and all policy decision-makers in an even tighter box. Look, we all know that inflation is real. It is hitting, whether it is gas at $3.79 versus $2.74 a year ago, groceries, you name it, housing. And when you were here in July, I talked about the hous- ing situation—my family is in construction—and what that means. VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00040 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 37 And we can’t just wave a magic wand and say, ‘‘Oh, we are going to lower prices.’’ That just simply isn’t realistic. But what I heard last night is that the President is acknowl- edging that people are living paycheck to paycheck, and he under- stands that, yet the message I keep hearing from the President and my friends on the other side of the aisle is that we need to spend even more. And I am concerned that is going to put us again into an even tighter box than we currently are, so if you care to touch on that before I move on? Mr. POWELL. I should stay away from fiscal policy, if you don’t mind. Mr. HUIZENGA. And look, I am not asking whether you support a particular bill or not. Theoretically, for your classroom—America is your classroom as they are watching this right now—spending is a contributing factor to inflation. Correct? Mr. POWELL. It is, but it is not really our job and not ours to comment on. We do have— Mr. HUIZENGA. I understand that. Mr. POWELL. —a role here and we need to do it. Mr. HUIZENGA. I fully understand that. Just the facts. Okay. I am going to move on to another issue, which is a rules-based approach to monetary policy. In the 114th Congress, in 2015, I in- troduced the FORM Act, which would lay out a rules-based mone- tary policy. And I know in your testimony today you indicated that a rate increase is expected, and you confirmed that with the rank- ing member. What I am curious, about, though, is that since 2017, the Fed’s monetary policy report included a section on monetary policy rules, and you have been very clear, and now Secretary Yellen has been clear that a lot of rules are modeled and looked at. The only excep- tion to this was 2020, the first year of the pandemic, and maybe more surprisingly, the report that was just released this month, for example, in 2017, the monetary policy section of the report stated that, ‘‘Monetary policymakers consider a wide range of information on current economic conditions.’’ It is not included in this report. Can you shed some light on why it was omitted this year? Mr. POWELL. I honestly didn’t know that was the case, or if someone talked to me about this before the thing was printed and sent up here, I don’t remember. That is also a real possibility, given the number of things I have on my mind right now. But as you say, we didn’t have it in July of 2020. We will have it in the next one. There was no big thought, as far as I know, going into that. It is just sometimes we include it and sometimes we don’t. I will say that thinking about policies through rules is something that I learned about in monetary policy, doing that. When you are actually implementing policy, no committee has ever really viewed its policy rules as a way of setting policy. They use them to inform your thinking. Mr. HUIZENGA. Yes, and I guess my idea with the format was to then inform the market, and that includes us as citizens as well. And I would like this committee to re-examine that. I appreciate the indulgence, Madam Chairwoman, as we had that crosstalk at the beginning, and I yield back. VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00041 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 38 Chairwoman WATERS. Thank you. The gentleman from Illinois, Mr. Casten, who is also the Vice Chair of our Subcommittee on Investor Protection, Entrepreneur- ship, and Capital Markets, is now recognized for 5 minutes. Mr. CASTEN. Thank you, Madam Chairwoman. And thank you, Chair Pro Tempore Powell. I am always struck that there is a real risk of hubris for those of us in our line of work, at least up here. If we get to write laws, sometimes we conclude that means we can write the laws of phys- ics as well, which is dangerous. And I am troubled by some of the questioning of my colleagues and some of the debates around con- firmation of your colleagues around climate change. The Intergovernmental Panel on Climate Change (IPCC) report which came out last week said that climate change effects are out- pacing our ability to adapt. We are seeing communities that sort of simultaneously have droughts, floods, and fires, and money is moving in surprising ways. We have seen personal stories just in the last months of one coastal community where the roads are being washed out, that haven’t yet paid off the bonds that were used to pay for the road, and they don’t know how to reconnect those communities. And in another community on the coast, the mayor is sitting there realizing that in one neighborhood, he can afford to build a sea wall, and in another neighborhood, it is cheap- er to relocate people and then deal with the political fallout of that decision. We have massive political risks that are coming, and we know they are coming because the laws of physics do not care how we vote. And I am concerned by your response to Mr. Posey—I think you said we have not even done the scenarios yet on climate change. I understand these are complicated, but if those scenarios haven’t been done, I want to start—if we do not deal with the fi- nancial fallout, the political fallout is going to be far worse. And I just want to start with a very specific question. NOAA and NASA came out with a report, I think last week, or 2 weeks ago, saying that Florida is looking at 12 inches of sea level rise in the next 10 to 20 years, and 18 inches by 2050, which means that there are whole communities in Florida where there is going to be com- plete property loss before a 30-year mortgage is repaid; that was issued today. Are Fannie Mae and Freddie Mac changing their lending stand- ards in response to those risks in those communities in Florida and elsewhere that are now within 30 years of being unable to repay those notes? Mr. POWELL. I don’t know. Mr. CASTEN. I ask the question there, because in the U.S. Com- modity Futures Trading Commission (CFTC) report, ‘‘Managing Climate Risk in the Financial Sector,’’ which came out in 2020, they noted that the higher an area’s risk for coastal flooding, the more likely that commercial banks will be offloading their risks onto Fannie and Freddie. So, if the sophisticated players in the sys- tem are seeing this risk, and we, at a Federal level, are backstop- ping, how are we isolating our Federal balance sheet from that risk exposure? VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00042 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 39 Mr. POWELL. I think that is a very likely outcome, actually. As private lenders move away from that, will the government force people to move away from the coast, or will they wind up—the gov- ernment, that is, us—wind up picking up the tab? It’s more likely to be the latter, it seems to me. Mr. CASTEN. Moving away from offloading the risk onto the tax- payer, back when I was in the energy industry, one of the tells that we had that we knew there was a downturn coming in energy mar- kets was when the big banks started creating a special opportunity Fund 5. We all knew that was code for taking your Dodd-Frank Act compliance, that capital, and moving it into an equity pool and sell- ing it off to the least-sophisticated people in the equity space. Any- body who has spent time in the banking industry has seen that game. To what degree does the Fed or the Treasury have the ability to monitor where the sophisticated folks who are seeing this coming are shifting the risk off to the less-sophisticated folks in the private sector? Mr. POWELL. There is a lot of thinking going on about this. I would have to think about that. But there is a lot of thinking about what will happen over longer periods of time in coastal areas and things like that. I can look into that for you. Mr. CASTEN. And it is not just coastal, right? It is California fire risk. Do you rebuild that house where the fire is, and who is hold- ing the paper if it burns the second time, before it is paid off? Drought risk in communities, running away the capital move- ments. And to be clear, we are going to create so much wealth in the transition to a clean economy, but I think we can find more winners than losers if we are smart about this. But there is this huge capital play and the nervousness I get is, as I said, partly that we are shifting risk onto the public sector, and partly that if we don’t have a really good understanding of what the capital structure looks like in these communities, we are not seeing it. As you know, Senator Schatz and I have introduced this bill to push and encourage you and your colleagues to do these climate, whatever we are talking about, scenario analyses. But we know the sophisticated people are going to offload the risk, and as the IPCC report said, the effects are outpacing our ability to adapt and we need to get ahead of this much quicker. Mr. POWELL. I want you to know we are working on the sce- narios. It is an active effort on our part. Mr. CASTEN. Let us know how we can help you, make sure you have the resources to move a lot quicker. Thank you, and I yield back. Chairwoman WATERS. Thank you. The gentleman from Kentucky, Mr. Barr, is now recognized for 5 minutes. Mr. BARR. Thank you. Mr. Chairman, it’s good to see you again, and thank you for your testimony today. I appreciate your testi- mony that overspending has contributed to the inflation crisis we are facing right now, but I also appreciate your humility with re- spect to the Fed failing to meet its price stability mandate and the fact that you admit that inflation is primarily a monetary policy phenomenon. I want to focus on monetary policy in my questioning. VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00043 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 40 I know you understand that this has human costs. I want to share a couple of anecdotes from my district. A painter, Gerald Holland, from Nicholasville, Kentucky, says a gallon of paint costs $10 more today than a year ago. The Suffoletta family from Georgetown, Kentucky has been in the retail home furnishing busi- ness since the late 1940s. In a conversation last week, they in- formed me that in the last year, the cost of goods from their manu- facturers have increased 30 to 40 percent, and they are still receiv- ing price increase letters every week, and like most small busi- nesses, their costs of labor and overhead have gone up over 25 per- cent. So now, they are having to determine how to operate without passing those costs on to the end consumer, and still have some profits left at the end of the year. I could share dozens, as many of my colleagues could share doz- ens of these kinds of stories, including from constituents on fixed incomes who cannot afford the dramatic reduction in their pur- chasing power. Before November 2021, Chair Powell, when you declared it was time to retire the word, ‘‘transitory,’’ in relation to inflation, my col- leagues and I repeatedly, in hearings last year, after the $2 trillion spending bill, cautioned you that inflation wasn’t transitory, that we were hearing from our constituents, individuals and small busi- nesses, that inflation was hitting them hard and was sticky. But the FOMC kept up with the unconventional monetary policy. And even after you retired the word, ‘‘transitory,’’ as late as February 2022, the Fed was continuing its QE liquidity injections, even though inflation was at 7.5 percent, a 40-year high, and the Fed had rejected and immediately halted the QE at both its December and January policy meetings. This week, economist Mohamed El-Erian published an op-ed, in which he states that the Fed’s insistence that inflation was transi- tory is, ‘‘an error that will likely be remembered as one of its big- gest ever.’’ And pardon me for contributing to your humility on that. But my question is, has the FOMC learned from its mistake? Has it learned that unconventional monetary policy at a time when it is not needed is harmful for the economy? Has it learned that QE during a time of recovery is a recipe for inflation, and has it learned that we cannot print our way to prosperity? Mr. POWELL. I think the main thing that we have learned is that the supply-side constraints that we saw were not as transitory as we had hoped, and thought, and as I mentioned, every other main- stream economist and central bank around the world made the same mistake. That doesn’t excuse it, but we thought that these things would be resolved long ago. Mr. BARR. Does the FOMC—do you and your colleagues concede now, in hindsight, that the overly-accommodative monetary stance for too long was a mistake, a monetary policy mistake? Mr. POWELL. I will just answer for myself. That is for other peo- ple to assess. I would say that we had an expectation, and as I said earlier, I always thought there was a chance we would be wrong, and that if we were wrong, we would be able to pivot. And we did pivot, and we pivoted pretty quickly, but by then the economy real- ly was moving very, very fast. VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00044 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 41 Mr. BARR. On the pivot, how quickly do you expect a higher Fed funds rate, removing the accommodation to bring down inflation, and how does that affect the pace at which you would tighten? Mr. POWELL. As I mentioned, I expect the Fed funds rate to go up in 2 weeks, and I expect a series of rate increases this year. But as I mentioned earlier, given the current situation, we are going to move carefully. Mr. BARR. My concern is that to break this inflation fever now, you do not have a lot of good options. It is going to take some ag- gressive tightening in order to break historically-high inflation lev- els. Not to belabor the point, but one final thing on the climate stress testing. Last year, in response to my questions about the Fed’s de- cision to join the Network for Greening the Financial System, you affirmed that the Fed’s job was not to combat climate change. But in your confirmation hearing, you said that, ‘‘We are looking at cli- mate stress tests. This will be a key tool going forward.’’ To clarify, which is it? Is it that you will not use this, as Mr. Posey asked you, to support capital surcharges for banks serving fossil energy com- panies? Mr. POWELL. That is not the design nor intent of the stress sce- narios that we are working on right now. It is really to assist us and financial institutions, who are doing these things themselves very actively, the larger ones, to understand the risk. Mr. BARR. My time has expired, but as we look at a global energy crisis with the Ukraine and— Chairwoman WATERS. The gentleman’s time has expired. Mr. BARR. —it is critically important that we do not redirect cap- ital— Chairwoman WATERS. The gentleman from Massachusetts, Mr. Lynch— Mr. BARR. I yield back. Chairwoman WATERS. —who is also the Chair of our Task Force on Financial Technology, is now recognized for 5 minutes. Mr. LYNCH. Thank you, Madam Chairwoman. And thank you, Chair Powell, for your service and your great work. I do want to ask you a question about the SWIFT network, and I realize that the sanctions piece of this is owned by Treasury. But I am curious if in any of your risk analyses, you have looked at the possibility that if we did completely ban Russian banks from use of the SWIFT network, and it became a target of the Russian cyber forces, have we basically gamed out how that might happen, and do we feel comfortable that structurally and architecturally, the SWIFT network would be able to resist a state-sponsored assault on that messaging service? Mr. POWELL. I’m sorry, Mr. Lynch, I am really not the right per- son to answer that question. That is really a question that our Treasury Department or our Administration, more broadly, and the intelligence groups would be able to address. Mr. LYNCH. I am a little surprised at that, because earlier in your questions, you talked about cybersecurity and how that was in your lane, in part. But I will let that go. You did mention the recent Fed report on CBDC, and in that re- port it more or less pushed responsibility back to Congress to re- VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00045 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 42 solve some of the major issues around the creation of a Fed CBDC. And I know that we have a working group at MIT and the Boston Fed that are doing great work on this. It started under Chairman Gensler, but I believe Neha Narula is running that effort. In all honesty, I am not sure that Congress is equipped by itself to make those key decisions around architecture and the shape and form of any CBDC for the United States. I think we are relying on the Fed and the Treasury to help us. And so, I was hoping for a little bit more instruction with the Fed paper, and is there any way we could collaborate rather than pushing the responsibility on Con- gress, with all of the other issues we have to deal with, and also with the disparity in background in dealing with CBDC and those crypto issues? Mr. POWELL. Yes. Let me address that. What the great people in Boston are doing is really technical experimentation around how you would build a CBDC if you were going to do one, looking at different structures and options and technologies. That is separate from the policy questions of whether we should do this. How we are thinking of this is there is technical experimen- tation, there are all of the technology questions that have to be solved, but there are also the policy questions—should we do this and why, and how, and what should be the structure, and that kind of thing. So, we will be working on this project in coming years, and we hope building trust in Congress and in the public that we are doing it as a fair, honest, independent group who really is just looking out for the best interests of the country and of our citizens. And we will be making recommendations on the appro- priate structure, if we do come to make a recommendation. The point is, though, that our existing statute doesn’t really con- template a central bank digital currency so, ideally, we would get legislation, that would be authorizing legislation, and we would take part in it. It is not that we would be asking Congress to start this from scratch and figure out all the answers. We would be working with you to build trust in our process and ultimately come to you with a proposal, and then Congress would do its work and authorize. Mr. LYNCH. Thank you, but Mr. Chairman, the concern is that the architecture and the security of the system will guide policy. So, I believe we need to work together. But thank you. Madam Chairwoman, I yield back. Mr. POWELL. No, I agree. Chairwoman WATERS. Thank you. The gentleman from Texas, Mr. Williams, is now recognized for 5 minutes. Mr. WILLIAMS OF TEXAS. Thank you, Madam Chairwoman, and thank you, Chairman Powell, for being here. It is always good to have you come before the committee. There hasn’t been a Federal Reserve Chairman since Paul Volcker, in the 1980s, who has dealt with inflation at these levels that we talk about today, and historically, the Fed has been unable to reduce prices without sending our economy into a recession. And to further complicate the situation, the central bank has previously never had to deal with winding down such aggressive asset pur- chases to go along with increasing interest rates. VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00046 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 43 You are going to have to take action on both of these pressing issues, with the backdrop of what we see in Ukraine, between Rus- sia and Ukraine, and the general global instability that we have. Needless to say, you have a very tough job ahead of you. Mr. Chairman, how do you plan on getting inflation under con- trol without completely hampering growth, or worse, causing the economy to go into a recession? Mr. POWELL. That is exactly our objective. We are going to use our tools, we are going to raise interest rates, and we are going to shrink our balance sheet over the course of this year. As I men- tioned, during this critical phase of global events we are going to do that with care, and we will always move with care but particu- larly now. And that is how it works. We remove accommodation and the very high levels of demand that are, to some extent, a re- sult of our accommodative policy. Those rates will go up. Take housing, for example. The housing market should cool off. It is very, very hot right now. And that should happen broadly in the economy over time. We talk about getting to a neutral rate, which would be some- where between 2 and 2.5 percent. It may well be that we need to go higher than that. We just don’t know. And we don’t know what events will intervene in the meantime. We haven’t faced this chal- lenge in a long time, but we all know the history and we all know what we need to do. I also do think, and I think it is more likely than not that we can achieve what we call a soft landing, and they are far more com- mon in our history than is generally understood, and that would be what you described, which is to get inflation back under control without a recession. Mr. WILLIAMS OF TEXAS. Some of us in this room remember the 1980s. Mr. POWELL. Sorry? Mr. WILLIAMS OF TEXAS. Some of us in this room remember the 1980s and what it was like. We know that there is a lag period between the Federal Re- serve’s actions and the inflammatory implications being felt in the economy. The San Francisco Fed, which we have mentioned today, admits that this latency period could last anywhere from 3 months to 3 years, and for families and business owners, like myself, the 3 years would be an extremely long time to deal with prices at these elevated levels. Mr. Chairman, when the Fed eventually decides to raise interest rates, what tools will you have at your disposal to ensure your ac- tions are felt with as little a delay as possible so we can once again have price stability, like we have talked about? Mr. POWELL. In this world that we live in now, when we make a decision about interest rates, or frankly, even talk about a deci- sion to raise interest rates, markets pick it up like that. Financial positions have already tightened. We haven’t actually lifted off from zero, but as of a week ago, the market was pricing in, it was literally already reflected in financial conditions, to some extent, six or seven rate increases. It is less than that now, and we haven’t made a decision to do that yet. VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00047 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 44 Our decisions get into financial conditions very quickly. It does take time, of course, for that to affect economic activity, and that is where you get 3 months to longer than that. I think by the end of a year, much of the effect is generally thought to be in. But that time period has already started, because monetary pol- icy really works through expectations, and we are now expecting rate increases, and they have already happened, in effect, and we have to ratify them, of course. Mr. WILLIAMS OF TEXAS. We are seeing them. Finally, in the past year you have referenced productivity gains as being key to in- crease the living standards for American workers over time. Unfor- tunately, we have seen the Biden Administration implement many new, time-consuming regulations that are forcing businesses, again like mine and others, away from productive activities. The Amer- ican Action Forum conducted a study which estimated that new regulations from President Biden’s first year in office will cul- minate in over 131 million new paperwork hours. Quickly, Mr. Chairman, can you discuss the correlation between a company’s regulatory burden and the effect on productivity? Mr. POWELL. I am a little bit familiar with the research, and it has actually been difficult to make those connections in research. But we know, as a practical matter, we all want just the right amount of regulation, not too much, and to the extent that you are spending resources unnecessarily, that will hold you back. Mr. WILLIAMS OF TEXAS. Thank you very much, and I will yield my time back, Madam Chairwoman. Chairwoman WATERS. The gentleman from New York, Mr. Torres, is now recognized for 5 minutes. Mr. TORRES. Thank you, Madam Chairwoman. During his State of the Union, President Biden reported that the U.S. has seen the fastest job growth in history, the U.S. has had the fastest economic growth in more than 4 decades, and the U.S., among advanced economies, has had the fastest economic recovery from COVID. And so, the inflation that we have seen is the consequence of a strong economy colliding with a supply chain disrupted by COVID-19. Given the Russian invasion of Ukraine and the inflationary pres- sures that could likely follow, is there a risk that raising interest rates could backfire, that it could cause a recession without actu- ally reining in inflation? How significant is the risk of stagflation? Mr. POWELL. There are several questions in there. Our goal, of course, is to raise interest rates in a way that restrains inflation and gets it back to levels that we would call consistent with price stability, and to do that while still sustaining an expansion and a strong labor market. That is our goal, and that is how we will use our tools. There are no guarantees in life, but that is our intention and what we propose to do. Mr. TORRES. The U.S., as you know, has severely sanctioned Rus- sia, and Russia is expected to engage in cyber retaliation. There are financial institutions, commercial banks that invest up to $1 billion every year on cybersecurity. How much does the Fed invest in its own cybersecurity every year? Mr. POWELL. I don’t have a dollar amount for you, but it is quite substantial. We have very good cyber people at the Reserve Banks and at the Board here in Washington. And as I mentioned a little VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00048 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 45 earlier, we have been at a very highly-elevated level of oversight on cyber issues for several months now, as this event has in- creased. And we haven’t seen any troubling incidents yet, but we remain on high alert. Mr. TORRES. The ability of the U.S. to hold rogue states like Rus- sia accountable depends heavily on the SWIFT international pay- ment system. In your view, how easily could China and Russia cre- ate an alternate messaging service that could seriously compete with SWIFT and seriously undermine the effectiveness of SWIFT sanctions? Mr. POWELL. That is an interesting question to speculate about. I think in the near term, that is not something you can create over- night. I know that China does have their system. It is really a question for the longer term, and not for the immediate term. It is not something you could do quickly like that, but let me think about that. Mr. TORRES. Fair enough. I have a question about stablecoins. The leading stablecoin issuers have chosen to peg their stablecoins to the U.S. dollar, which to me represents a vote of confidence that reinforces rather than challenges the status of the dollar as the world’s reserve currency. The U.S. has no central bank digital cur- rency (CBDC) of its own, and is unlikely to have one in the years to come. Do you believe, as I do, that dollar stablecoins can play a role in out-competing China when it comes to digital currencies? Mr. POWELL. I will say it this way. I think there may well be a role for well-regulated stablecoins. I think there is the possibility over time, and this is not what we see right now, that they could be efficient and popular among consumers and things like that. I think in terms of helping us compete with China, I don’t know but possibly, yes. Mr. TORRES. I am assuming it is better to have stablecoins pegged to the dollar than to have stablecoins pegged to China’s cur- rency, or the currency of another country? Mr. POWELL. I would agree with you that, in a way, that is con- sistent with the role of the dollar, and most of the stablecoins are, of course, dollar-based. Mr. TORRES. I have a question about the Community Reinvest- ment Act (CRA). Even though the CRA exists to prevent racial dis- crimination in matters of lending, also referred to as redlining, reg- ulators fail to consider race when enforcing the CRA. Do you think race should be considered? Mr. POWELL. We went out with an advance notice of proposed rulemaking a couple of years ago. We took in a whole lot of com- ments, and took those into account, and I think we are now sitting down with the OCC and the FDIC to come up with a notice of pro- posed rulemaking, and that is one of the issues that we have been thinking about very carefully. And I don’t have any announcement for you, but that is something that is going to come out of those conversations. Mr. TORRES. But you are open to considering it? Mr. POWELL. It is something we have been considering. We asked for comment on it. Mr. TORRES. That is the extent of my questioning. Thank you, Madam Chairwoman. VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00049 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 46 Chairwoman WATERS. Thank you. The gentleman from Arkan- sas, Mr. Hill, is now recognized for 5 minutes. Mr. HILL. Thank you, Madam Chairwoman. I appreciate the hearing. And Mr. Chairman, thank you so much for coming back for your Humphrey Hawkins testimony, and we all wish you the best of luck as you complete the confirmation process in the Senate. I enjoyed hearing Mr. Kustoff from Tennessee talk about William McChesney Martin, or actually he was talking about the 1970s. I guess my friend from Kentucky, Mr. Barr, brought up William McChesney Martin. And it made me think about the 1970s, and you and I both started our business careers in that decade, where inflation was really considered the number one economic concern in the United States and around the world. Arthur Burns was your predecessor then, and I recently read a talk he gave called, ‘‘The Anguish of Central Banking.’’ Have you heard of that before? Mr. POWELL. Yes, it rings a bell. Mr. HILL. Well, I commend it to you. It was delivered in 1979, so he was no longer the Chairman, and he was reflecting on his tenure at the Fed and also on fiscal policy of the 1960s and 1970s. So, I commend it to you and the Federal Open Market Committee, and to my colleagues here on the committee. And with your permis- sion, Madam Chairwoman, I would like to insert it in the record. Chairwoman WATERS. Without objection, it is so ordered. Mr. HILL. It is a stark reminder that when we abandon fiscal dis- cipline and our core financial principles, and instead embrace what I consider economically-illiterate concepts like modern monetary theory, we get into economic anguish. And in this talk, Chairman Burns reflects on his own mistakes at the helm of the Fed, as well as the abandonment of conservative government finance, when Burns warned, ‘‘fear of immediate unemployment rather than fear of current or eventual inflation comes to dominate economic policy- making.’’ That was his warning to us, and I think it merits at this time—you said you don’t want to go back to the 1970s. In fact, you argued that is what we are trying to absolutely avoid. So, I do en- courage people to read this report, because inflation is a thief. You answered a question from Mr. Huizenga that you were not aware that in the 2022 monetary policy report, the rules section in the monetary policy was not included. Is that right? Mr. POWELL. I was aware of it a couple of days ago. What I said was, I don’t remember any prior discussion, but that doesn’t mean it didn’t happen. It just means I didn’t remember it. Mr. HILL. Right. In the FOMC meetings, do they still have a presentation, part of the staff presentation, sort of a trend analysis on using those rules that have traditionally been in the policy? Does that still go on in FOMC meetings? Mr. POWELL. Yes. Yes, it does. Mr. HILL. Yes. I think that is an indication that it is probably best that it be included in the report. I was looking at some forecasting about the so-called Taylor Rule, dating to the 1990s, which you have testified on many times. Are you aware of what the Taylor Rule would indicate now in its formula, vis-a-vis the inflation that we have today? Mr. POWELL. Generally, yes. Mr. HILL. Do you know the range that— VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00050 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 47 Mr. POWELL. High. Mr. HILL. Yes. The answer I saw was 9.55 percent, which doesn’t mean it is right or wrong, but it is one of those indicators about how far off we are maybe in our funds rate targeting. I am glad to hear that you will consider that being put back in the report. I also wanted to raise the subject of the Fed mandate. You have taken some questions on that today, too. We have had legislation in the past to reconsider the 1977 approach Congress took in the middle of that inflation to have both price stability and full employ- ment, and we have debated that in this committee before. And in my view, considering the fiscal policy stimulus and the monetary policy that we have had in the last couple of years, we really have to focus on price stability. And in Congress, we are here to really prevent that kind of inflation, and I recognize and I am happy to say that it is both a fiscal responsibility and a monetary policy. I am proposing that we go back to price stability. And we won’t be alone. As I understand it, New Zealand, Canada, Australia, and the United Kingdom have that as their sole mandate: price sta- bility. Is that your understanding too, of those central banks? Mr. POWELL. Yes. I think the European Central Bank (ECB)— that would be a matter for Congress, obviously. I would say, if I were to show you monetary policy response to five central banks, or six central banks, I would say three of them would be like us, a dual mandate, and three of them would be just inflation. You wouldn’t actually see any difference in their reaction function be- cause they do have to look at resource utilization, which is employ- ment, in order to determine policy. So, you wind up with very simi- lar answers. Mr. HILL. I thank you for your testimony, and again, wish you well in your final confirmation process. And Madam Chairwoman, I yield back. Chairwoman WATERS. Thank you. The gentlewoman from North Carolina, Ms. Adams, is now recognized for 5 minutes. Ms. ADAMS. Thank you, Madam Chairwoman, and Chair Powell, it is good to see you again, sir. Mr. POWELL. It’s good to see you. Ms. ADAMS. Thank you so much for being here, and of course, I would have preferred to be congratulating you on your reappoint- ment to the Federal Reserve, but hopefully, we can get that done. I did publish an op-ed this morning with Chairwoman Waters, Con- gressional Black Caucus Chairwoman Beatty, and some African- American colleagues on the Financial Services Committee, calling on Senator Toomey to return to the table and give you and the other four nominees the vote that you deserve. Let me ask you—a simple yes or no will do here—do you believe that the Federal Reserve would be better able to serve the Amer- ican people if it had a fully-staffed Board of Governors? Mr. POWELL. I want to thank you for your kind words and sup- port, but I wouldn’t want to comment directly or indirectly on the Senate. I am a nominee, and I await the Senate’s judgment, and I would prefer not to get into that process, other than as a nomi- nee. Ms. ADAMS. Okay. Thank you, sir. VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00051 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 48 Let me switch gears and talk for a moment about Russia. As we have discussed extensively today, Russia’s invasion of Ukraine has consequences far beyond the geopolitical. We have discussed the potential systemic risks the invasion poses to global markets and the mechanisms to keep Russia isolated from the international economy for the duration of this illegal aggression. But I am concerned about the potential systemic risks here at home. The European Central Bank has identified systemically im- portant financial institutions with ties to Russian banks, and those institutions could potentially require assistance to live up to their obligations. Are there any U.S. institutions that you are monitoring that have outside default risks as it pertains to the freezes on Rus- sia’s assets? Mr. POWELL. Basically, no. Our financial system and our finan- cial institutions have relatively little exposure to Russia, and even the largest exposures that any of them have are not very big. It would need to be a second-order thing, whereby a foreign financial institution has exposures to Russia but also has exposures to our banks. And we don’t see that as a primary risk, but it is something we are watching. Ms. ADAMS. Okay. With my remaining time, let me ask you, your November report indicated that the forthcoming rise in interest rates will have ripple effects throughout the entire economy. Can you speak to the interconnection between the Fed’s rate hikes and the freeze on Russian assets as it pertains to the prices of certain commodities? Mr. POWELL. The price of commodities is generally set on the world market by supply and demand. And we do intend to raise in- terest rates this year, as we have said, but as long as we are in this very sensitive phase of events in Eastern Europe, we are going to be careful in doing so. We are going to avoid adding uncertainty, as I mentioned a little earlier. And we do believe that over time, as we raise the interest rates and as we get relief from supply-side improvements, as well for inflation, that we will get inflation back down. We expect to see that happening, and to the extent that we don’t see it happen, we are prepared to move more aggressively. Ms. ADAMS. Great. Thank you very much. Madam Chairwoman, I yield back. Chairwoman WATERS. Thank you. The gentleman from Ohio, Mr. Gonzalez, is now recognized for 5 minutes. Mr. GONZALEZ OF OHIO. Thank you, Madam Chairwoman, and thank you, Chairman Pro Tempore Powell, for being so forthright. I think your answers to Mr. McHenry’s questions at the outset were incredibly helpful. I think it was probably the most direct that you have been with respect to how you are viewing interest rate policy heading into the March meeting. I certainly appreciate that, and I suspect others do as well. Thank you for that trans- parency. I want to start with Ukraine and Russia, and I know this is just evolving. My view, despite some, what I thought was a little bit of flowery rhetoric last night from the President, is that this is the beginning of a long-term conflict. This is not something that will be over in a matter of days, but months, and perhaps years, as the VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00052 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 49 Russians encircle Ukraine and our lack of response, in many re- spects. I know you are a student of history, and you are a student of monetary policy history. When you look at a world where this is a longer-term conflict, how do you view a longer-term military en- gagement in Europe impacting rate policy and balance sheet policy, and if you haven’t begun that study yet, is that something that the Fed will endeavor in the coming weeks and months? Mr. POWELL. It is a really good question, and I would have to agree with you that this event does seem to be one that is a game- changer and will be with us for a very long time. As I mentioned, we don’t understand yet. There are events yet to come that we haven’t seen and we don’t know what the real ef- fect on the U.S. economy will be. We don’t know whether those ef- fects will be lasting or not. But it is something that we are going to be thinking about a lot. It is exactly the things that we will be thinking about. It is really too early to say, but it is not too early to try to imagine and assess. Mr. GONZALEZ OF OHIO. Thank you. And I know my thoughts and prayers are with the Ukrainian people, as are many of my col- leagues—all of my colleagues, I think we are unanimous in that, that we hope for a successful outcome, although admittedly, the days ahead appear to be quite choppy, and it is hard to see a posi- tive outcome in the near term. I want to shift to another thing the President said last night about companies needing to lower their costs, not their wages, and that is how we are going to fight inflation. That sounds wonderful. How do you magically sort of lower your costs as a company? It is sort of implied that it is corporate greed that is leading to inflation. I have read your comments. I think they are spot on with respect to the supply-demand dynamics. But are you aware of a way for companies to just sort of unilaterally lower their costs? Mr. POWELL. First, I would not comment on the President’s com- ments at any time, and I won’t do that now. I think, and my experience in the business world very much was that businesses are constantly managing their costs. That is a lot of what businesses do, so it is an ongoing thing. But I didn’t watch the speech and I don’t know the context, and I would never com- ment on anything the President says. Mr. GONZALEZ OF OHIO. Thank you. Shifting to my last question, there has been talk of whether cryptocurrencies represent a good vehicle for sanctions avoidance. I think you have rightly said that is maybe for the purview of Treasury. But generally speaking, a system that transactions occur on a public ledger that are auditable and reviewable by the entire world—anybody in the world can go and check and monitor these things—and in a world where those same systems have transaction speed limits, essen- tially, do you think in that world, a public ledger is a good way to launder money or avoid sanctions? Mr. POWELL. I am not an expert on sanctions, so I’m reluctant to comment on that in the context of sanctions, just because it is not our field. I would say there’s a balance you have to strike be- tween privacy, which is very important, yet also the ability of law enforcement and national security to track payments. And I think VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00053 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 50 to the extent that cryptocurrencies are a means by which you can evade both law enforcement and national security concerns, then that is not something we should tolerate. Mr. GONZALEZ OF OHIO. Thank you. Thank you for, again, your transparency, and I yield back. Chairwoman WATERS. Thank you. The gentlewoman from Penn- sylvania, Ms. Dean, is now recognize for 5 minutes. Ms. DEAN. Thank you, Chairwoman Waters, and thank you, Chair Powell, for being before us again today with such forthright testimony in such challenging times. I wanted to just start with the question of inflation and some- thing that you said to one of our colleagues in response to a ques- tion. You said that inflation is too high, we are seeing it every- where in the world, and ours is worse because our economy is stronger. Can you flesh out that duality a little bit, maybe contrast it with others globally who are struggling with inflation but do not have a strong underlying economy? Mr. POWELL. I think maybe the closest economies and political systems would be the countries of Western Europe and Canada. Advanced economy countries like that are all having the highest in- flation they have had in a very long time. Places like Germany, which is famously inflation-averse, has high inflation. Ours is a little higher. Our economy is now well above the level of output that we were at before the pandemic. If you just look at the output the economy had before the pandemic to where it is now, we are way above that, and other countries are kind of just getting back to that level. We have just had a stronger recovery, and that is because of monetary policy and fiscal policy and also just vaccines and a whole range of factors. So, of the advanced economies, ours is generally higher. And we’re going through this same process that the Bank of Eng- land and other central banks are going through, which is raising rates and trying to get inflation back under control. We are very committed to doing that. It is a common problem. Again, ours is worse, because our inflation is higher, largely because our economy is that much stronger. Ms. DEAN. I know you have a series of meetings and possible rate hikes, you talked about in 2 weeks, likely the 25 basis points increase. For my constituents, my consumers, what impact will we begin to see, will they begin to see with the small, incremental rate hikes? Mr. POWELL. It is a little bit like the rate hikes that took place in the first part of this century. The rate hikes that took place after the global financial crisis were much slower. They were every other meeting. But the cycle before that, there were rate hikes at con- secutive meetings. What you feel is these are fairly small rate in- creases, a quarter of a percentage point every 7 weeks. And, by the way, we haven’t made any decisions after this meeting, but the thought is that rates move up, our policy rate moves up, and with it, rates on mortgages, rates on car loans, rates on the loans that people take out to buy appliances, things like that. So companies, their borrowing costs go up. And you get to a point where you have raised it a few times, and it is still a gradual process, even though it is as much as twice as VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00054 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 51 fast as the last cycle. But people start to spend a little bit less, and economy demand returns to a lower level. By this time, we hope that the economy is going back to normal in terms of supply chains and the breakdown between goods and services spending, things like that. We hope we are getting help on the inflation front from a bunch of things. In any case, we do have the responsibility to generate price sta- bility, and we will use our tools to do that, over time. Ms. DEAN. I thank you for that. One particular area of concern for me is the role that increasing market consolidation has played in contributing to inflation. An example that we have seen is the huge price spikes in the meat industry, which has become incred- ibly concentrated, and consolidated. To what extent would you at- tribute supply chain fragility and recent price increases to market concentration? Mr. POWELL. We are not the competition authorities, and so I would defer to the competition authorities on all of those questions. In terms of inflation, though, inflation is mainly a macroeconomic phenomenon, which doesn’t link in the aggregate very well to con- centration. Some of the most concentrated industries, in fact, were those that drove low inflation. I am thinking there of warehousing and retail and things like that. Those industries consolidated and they drove lower prices. So, it is not so obvious. There clearly are industries where that may be the case, where they become consolidated and they are able to raise prices. It is not clear if they would be able to generate an inflationary cycle, but they can certainly raise prices, in the first instance. It is not a set- tled question in the economics, but again, we defer to the competi- tion authorities. Chairwoman WATERS. The gentlewoman’s time has expired. Ms. DEAN. Thank you, Madam Chairwoman. Chairwoman WATERS. Thank you. The gentleman from West Vir- ginia, Mr. Mooney, is now recognized for 5 minutes. Mr. MOONEY. Thank you, Madam Chairwoman. Inflation remains a serious concern for my constituents in West Virginia. Inflation erodes the real value of every paycheck. When the cost of filling a tank of gas or buying groceries increases, all Americans lose money. Today, I would like to focus on a slightly different aspect of infla- tion, which is inflation’s corrosive effect on Americans’ savings. The combination of low interest rates and high inflation has clobbered returns on common savings tools, like savings accounts, money market funds, and certificate of deposit. January’s 12-month Con- sumer Price Index of 7.5 percent pushes the yield on these savings tools into deeply-negative territory. In other words, with inflation as high as it is, Americans who have saved responsibly for years are losing their money over time. Chairman Powell, my first question is, how concerned are you about the effects that inflation and negative savings yields are hav- ing on the long-term health of our economic recovery? Mr. POWELL. I would agree that inflation falls heavily on people who are living on, for example, bank deposits and CDs. This is typically retired people and the elderly, and of course they do bear the brunt of this. That is one of the reasons we need to get infla- VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00055 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 52 tion back down to appropriate levels, and that is what we are working on. Mr. MOONEY. Thank you. Savings is an important way to achieve financial goals, like purchasing a new home, or paying for college, or retirement. Savings is a way to take control of your financial destiny. Savings is a part of how we can achieve the American Dream. I would like to raise another potential issue about the declining value of savings and its implications going forward. I am concerned that our current economic environment will discourage savings al- together. Chairman Powell, are you concerned about the effects that inflation and negative savings yields could have on Americans’ incentives to save money going forward? Mr. POWELL. Interesting. If it were to persist for a long time, I would be concerned. Of course, right now the level of savings on people’s balance sheets is at historic highs because they saved dur- ing the pandemic. They were not able to spend money on travel. Right now, we are looking at a couple trillion dollars of savings above where they would have been without the pandemic. But over time, yes, savings is important, and I would agree that high inflation can be a disincentive. Mr. MOONEY. Thank you. I think it is important that we monitor the savings rate closely with this in mind. If Americans save less, it could have economy-wide implications, both now and especially in the future. So, we should be careful to ensure that monetary pol- icy encourages savings going forward. That is all I have. Thank you, Madam Chairwoman. I yield back. Chairwoman WATERS. Thank you very much. The gentlewoman from Texas, Ms. Garcia, who is also the Vice Chair of our Sub- committee on Diversity and Inclusion, is now recognized for 5 min- utes. Ms. GARCIA OF TEXAS. Thank you, Madam Chairwoman, and thank you, Chairman Pro Tempore Powell, for being with us today. I think I am going to be last, so I’m going to try to be soft. In a recent press conference, you had mentioned that forecasters expect inflation to subside as supply chain disruption issues are re- solved. I understand this has been addressed, and my colleagues and I are working on addressing the supply chain crisis through multiple legislative solutions. At home, in Houston, one of the nation’s shipping and energy capitals, we are focused on expanding and developing the nation’s ports and waterways to continue building our role in facilitating global energy and trade. You also said in your remarks today that we understand that high inflation poses significant hardships, es- pecially on those least able to meet the higher costs of essentials like food, housing, and transportation. I want to focus on housing. In Houston, housing costs have sky- rocketed, with the median price rising 18 percent last year, and the average, 16 percent. Nationwide, housing indirect prices account for roughly one-third of the CPI, and most economists do not expect this problem to be resolved as quickly as supply chain bottlenecks. In your earlier exchange with my colleague, Congressman Wil- liams, you mentioned a soft lending, wherein the Fed will address inflation first, and survey the housing prices trending downward. VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00056 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 53 My question is this: Is the Fed looking at alternative plans? In the event that housing prices do not trend with inflation, how might that impact inflation reviving if low housing supply continues the upward pressure? Mr. POWELL. We do. As you mentioned, housing costs and hous- ing services costs, and if you are a renter, they are a very big chunk of what goes into the inflation indices. And to the extent housing prices—we are not saying they will go down, but we are saying that the increases will be much smaller. We don’t need housing prices to actually decline. What we can’t have is, we don’t want to have them increasing at very high levels as they have been doing. Largely as a function of supply and demand—I don’t know about Houston, but in many places in the country, it is difficult to find lots, difficult to find labor, and difficult to get materials, because materials are very expensive. Ms. GARCIA OF TEXAS. We are experiencing that. Mr. POWELL. Yes, and demand is very strong, interest rates are low, and what you get is a lot of buyers and not enough new houses. What will happen as we raise interest rates—and this is already happening, it is already priced in—is that mortgage rates will go up and you will see that prices will begin to go up more slowly, de- mand will decline, and hopefully, we will get back to a place where demand and supply are well-aligned. Ms. GARCIA OF TEXAS. Will we ever get back to the pre-pandemic levels? Mr. POWELL. Of price? Ms. GARCIA OF TEXAS. Yes, sir. Mr. POWELL. No. I would only expect that we could limit further price increases. We are not trying to drive prices back down. What we are trying to do is limit future prices. Ms. GARCIA OF TEXAS. Okay. How concerned are you that there seems to be a lack of investment in affordable housing, and how that could cause inflation to become a long-term problem, even if the Fed is able to get inflation under control in other segments of the economy, specifically, public housing? Mr. POWELL. Public housing is, of course, not our—our policy tools don’t generally meet the need for affordable housing. It is really more of a fiscal policy and a housing policy question. But I know that economic research shows that high housing costs for workers are making it difficult for people to live close to where they need to be going for work, and it is limiting the ability of peo- ple to be in the workforce, and ultimately limiting our economy. I will say that. Ms. GARCIA OF TEXAS. Last question, you mentioned in your re- marks that it impacts essentials like food, housing, and transpor- tation. What does increased inflation do to the poverty rate? I know unemployment is down. Does that basically mean poverty is coming down, or does it continue to rise with inflation? Mr. POWELL. Those things would have offsetting effects. To the extent inflation is going up faster than people’s wages—and that is actually not the case for people at the lowest end of the spectrum, because that is where the highest wage increases have been, in the VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00057 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI 54 aggregate—but to the extent that was happening, it would poten- tially increase poverty, but to the extent people are going back to work, that would decrease it. Ms. GARCIA OF TEXAS. Thank you. Madam Chairwoman, I yield back. Chairwoman WATERS. Thank you very much. I would like to thank Mr. Powell for his testimony today. The Chair notes that some Members may have additional ques- tions for this witness, which they may wish to submit in writing. Without objection, the hearing record will remain open for 5 legis- lative days for Members to submit written questions to this witness and to place his responses in the record. Also, without objection, Members will have 5 legislative days to submit extraneous mate- rials to the Chair for inclusion in the record. This hearing is adjourned. [Whereupon, at 1:03 p.m., the hearing was adjourned.] VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00058 Fmt 6633 Sfmt 6633 K:\DOCS\HBA061.000 TERRI A P P E N D I X March 2, 2022 (55) VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00059 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 56 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00060 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 100.13174 ereh 1 oilof tesffo tresnI 57 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00061 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 200.13174 ereh 2 oilof tesffo tresnI 58 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00062 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 300.13174 ereh 3 oilof tesffo tresnI 59 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00063 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 400.13174 ereh 4 oilof tesffo tresnI 60 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00064 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 500.13174 ereh 5 oilof tesffo tresnI 61 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00065 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 600.13174 ereh 6 oilof tesffo tresnI 62 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00066 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 700.13174 ereh 7 oilof tesffo tresnI 63 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00067 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 800.13174 ereh 8 oilof tesffo tresnI 64 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00068 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 900.13174 ereh 9 oilof tesffo tresnI 65 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00069 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 010.13174 ereh 01 oilof tesffo tresnI 66 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00070 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 110.13174 ereh 11 oilof tesffo tresnI 67 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00071 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 210.13174 ereh 21 oilof tesffo tresnI 68 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00072 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 310.13174 ereh 31 oilof tesffo tresnI 69 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00073 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 410.13174 ereh 41 oilof tesffo tresnI 70 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00074 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 510.13174 ereh 51 oilof tesffo tresnI 71 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00075 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 610.13174 ereh 61 oilof tesffo tresnI 72 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00076 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 710.13174 ereh 71 oilof tesffo tresnI 73 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00077 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 810.13174 ereh 81 oilof tesffo tresnI 74 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00078 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 910.13174 ereh 91 oilof tesffo tresnI 75 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00079 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 020.13174 ereh 02 oilof tesffo tresnI 76 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00080 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 120.13174 ereh 12 oilof tesffo tresnI 77 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00081 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 220.13174 ereh 22 oilof tesffo tresnI 78 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00082 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 320.13174 ereh 32 oilof tesffo tresnI 79 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00083 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 420.13174 ereh 42 oilof tesffo tresnI 80 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00084 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 520.13174 ereh 52 oilof tesffo tresnI 81 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00085 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 620.13174 ereh 62 oilof tesffo tresnI 82 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00086 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 720.13174 ereh 72 oilof tesffo tresnI 83 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00087 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 820.13174 ereh 82 oilof tesffo tresnI 84 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00088 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 920.13174 ereh 92 oilof tesffo tresnI 85 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00089 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 030.13174 ereh 03 oilof tesffo tresnI 86 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00090 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 130.13174 ereh 13 oilof tesffo tresnI 87 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00091 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 230.13174 ereh 23 oilof tesffo tresnI 88 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00092 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 330.13174 ereh 33 oilof tesffo tresnI 89 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00093 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 430.13174 ereh 43 oilof tesffo tresnI 90 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00094 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 530.13174 ereh 53 oilof tesffo tresnI 91 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00095 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 630.13174 ereh 63 oilof tesffo tresnI 92 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00096 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 730.13174 ereh 73 oilof tesffo tresnI 93 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00097 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 830.13174 ereh 83 oilof tesffo tresnI 94 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00098 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 930.13174 ereh 93 oilof tesffo tresnI 95 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00099 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 040.13174 ereh 04 oilof tesffo tresnI 96 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00100 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 140.13174 ereh 14 oilof tesffo tresnI 97 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00101 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 240.13174 ereh 24 oilof tesffo tresnI 98 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00102 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 340.13174 ereh 34 oilof tesffo tresnI 99 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00103 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 440.13174 ereh 44 oilof tesffo tresnI 100 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00104 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 540.13174 ereh 54 oilof tesffo tresnI 101 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00105 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 640.13174 ereh 64 oilof tesffo tresnI 102 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00106 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 740.13174 ereh 74 oilof tesffo tresnI 103 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00107 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 840.13174 ereh 84 oilof tesffo tresnI 104 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00108 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 940.13174 ereh 94 oilof tesffo tresnI 105 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00109 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 050.13174 ereh 05 oilof tesffo tresnI 106 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00110 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 150.13174 ereh 15 oilof tesffo tresnI 107 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00111 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 250.13174 ereh 25 oilof tesffo tresnI 108 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00112 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 350.13174 ereh 35 oilof tesffo tresnI 109 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00113 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 450.13174 ereh 45 oilof tesffo tresnI 110 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00114 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 550.13174 ereh 55 oilof tesffo tresnI 111 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00115 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 650.13174 ereh 65 oilof tesffo tresnI 112 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00116 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 750.13174 ereh 75 oilof tesffo tresnI 113 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00117 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 850.13174 ereh 85 oilof tesffo tresnI 114 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00118 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 950.13174 ereh 95 oilof tesffo tresnI 115 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00119 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 060.13174 ereh 06 oilof tesffo tresnI 116 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00120 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 160.13174 ereh 16 oilof tesffo tresnI 117 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00121 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 260.13174 ereh 26 oilof tesffo tresnI 118 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00122 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 360.13174 ereh 36 oilof tesffo tresnI 119 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00123 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 460.13174 ereh 46 oilof tesffo tresnI 120 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00124 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 560.13174 ereh 56 oilof tesffo tresnI 121 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00125 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 660.13174 ereh 66 oilof tesffo tresnI 122 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00126 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 760.13174 ereh 76 oilof tesffo tresnI 123 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00127 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 860.13174 ereh 86 oilof tesffo tresnI 124 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00128 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 960.13174 ereh 96 oilof tesffo tresnI 125 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00129 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 070.13174 ereh 07 oilof tesffo tresnI 126 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00130 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 170.13174 ereh 17 oilof tesffo tresnI 127 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00131 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 270.13174 ereh 27 oilof tesffo tresnI 128 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00132 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 370.13174 ereh 37 oilof tesffo tresnI 129 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00133 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 470.13174 ereh 47 oilof tesffo tresnI 130 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00134 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 570.13174 ereh 57 oilof tesffo tresnI 131 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00135 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 670.13174 ereh 67 oilof tesffo tresnI 132 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00136 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 770.13174 ereh 77 oilof tesffo tresnI 133 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00137 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 870.13174 ereh 87 oilof tesffo tresnI 134 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00138 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 970.13174 ereh 97 oilof tesffo tresnI 135 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00139 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 080.13174 ereh 08 oilof tesffo tresnI 136 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00140 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 180.13174 ereh 18 oilof tesffo tresnI 137 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00141 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 280.13174 ereh 28 oilof tesffo tresnI 138 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00142 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 380.13174 ereh 38 oilof tesffo tresnI 139 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00143 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 480.13174 ereh 48 oilof tesffo tresnI 140 VerDate Nov 24 2008 14:59 Jul 15, 2022 Jkt 095071 PO 00000 Frm 00144 Fmt 6601 Sfmt 6601 K:\DOCS\HBA061.000 TERRI 580.13174 ereh 58 oilof tesffo tresnI

Jerome H. Powell (2022, March 1). Congressional Testimony. Testimony, Federal Reserve. https://whenthefedspeaks.com/doc/testimony_20220302_chair_monetary_policy_and_the_state_of_the

@misc{wtfs_testimony_20220302_chair_monetary_policy_and_the_state_of_the,
  author = {Jerome H. Powell},
  title = {Congressional Testimony},
  year = {2022},
  month = {Mar},
  howpublished = {Testimony, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/testimony_20220302_chair_monetary_policy_and_the_state_of_the},
  note = {Retrieved via When the Fed Speaks corpus}
}