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23 Jun, 2022 07:50

Fed chief at odds with Biden over cause of US inflation

Russia’s military operation in Ukraine is not the ‘primary driver,’ Jerome Powell told lawmakers
Fed chief at odds with Biden over cause of US inflation

The chairman of the US Federal Reserve has rejected the White House’s assertion that soaring inflation in the country is mostly being driven by the crisis in Ukraine. During a Senate hearing on Wednesday, Jerome Powell pointed out that prices were spiking well before Russia attacked its neighboring state.

He was responding to a question from Senator Bill Hagerty of Tennessee, who said the situation with prices in the US had many driving factors, including “supply-chain disruptions, regulations that constrain supply… rising inflation expectations, and excessive fiscal spending.”

He then asked if Powell agreed with US President Joe Biden's assertion that the situation in Ukraine was the most influential factor, considering the dynamics of inflation over the past 18 months.

“No, inflation was high… before the war in Ukraine broke out,” the Fed chief said.

Since Russia attacked Ukraine in late February, the White House has repeatedly blamed Russian President Vladimir Putin for causing inflation in the US. It even coined the term “Putin’s price hike.”

“We know that 61% of [recent inflation] is driven by the price – by energy costs, by Putin’s invasion into Ukraine,” Jen Psaki, who was the White House press secretary at the time, told reporters in late April.

Last Sunday, the White House tweeted that the situation in Ukraine was “the biggest single driver of inflation” in the country. Senator Hagerty described this as “misinformation” and said in his exchange with Powell that it was an attempt to deflect blame.

Later in the day, Secretary of Energy Jennifer Granholm was asked about Powell’s response during a press conference. “Most would say that the price of fuel has exacerbated inflation,” she said, claiming that the war in Ukraine had increased prices by diminishing supply.

Russia attacked its neighboring state in late February, following Ukraine’s failure to implement the terms of the Minsk agreements, first signed in 2014, and Moscow’s eventual recognition of the Donbass republics of Donetsk and Lugansk. The German- and French-brokered protocol was designed to give the breakaway regions special status within the Ukrainian state.

The Kremlin has since demanded that Ukraine officially declare itself a neutral country that will never join the US-led NATO military bloc. Kiev insists the Russian offensive was completely unprovoked and has denied claims it was planning to retake the two republics by force.