Biden Gets Bad News From His Own Official

Federal Reserve chair Jerome Powell on Tuesday suggested that inflation is proving stickier than expected and that monetary policy may need slightly more time to work its way through the economy to bring prices down to the central bank's target of 2 percent.

The suggestion that inflation may stay elevated for longer and that the Fed may need to retain higher rates for longer could add to concerns Americans have over the economy ahead of the election in November, something that could spell trouble for President Joe Biden.

Speaking at the Foreign Bankers' Association Amsterdam on Tuesday, Powell said headline inflation had fallen to 2.7 percent compared to a high of 7.1 percent but that progress on cooling prices had slowed to begin the year.

"The first quarter in the United States was notable for its lack of further progress on inflation. We had higher readings in the first quarter, higher than we expected. We did not expect this to be a smooth road, but these were higher than I think anybody expected," he said. "What that has told us is that we'll need to be patient and let restrictive policy do its work."

The Context

American voters are anxious about the economy. A Redfield & Wilton Strategies poll conducted for Newsweek last month revealed that half of voters say the U.S. economy is headed in the wrong direction. Forty-two percent believe that their financial lives are worse compared to a year ago and close to 50 percent think that they are worse off than where they were financially three years ago.

The poll also showed that 48 percent of voters think Biden's policies are responsible for the wrong trajectory of the economy.

With close to 60 percent naming the economy as the most important issue in the country, suggestions that inflation may take longer to come down to a level that the Federal Reserve can begin to cut rates is unlikely to shift people's perceptions of the economy any time soon.

Newsweek contacted the Biden campaign for comment via email on Tuesday.

Policymakers had raised rates to their current two-decade high of 5.25 to 5.5 percent range to battle soaring inflation. The tightening of monetary policy has pushed up borrowing costs for things like home loans. The longer rates stay elevated, the more time it will take before millions of Americans can afford to own a home, for example.

Read more: How the Federal Reserve Impacts Mortgage Rates

Views

Powell, who was reappointed by Biden to his current role after he was first nominated to the post by former President Donald Trump, did suggest that there were some good things happening with the economy.

"We expect continued growth—2 percent or better," he said. "We expect the labor market to be strong but to move further and further into balance."

Powell also said that his outlook was that inflation would continue to make progress toward that 2 percent central bank target though he was cautious.

"I would say my confidence in that is not as high as it was having seen these readings in the first three months of the year," he said. "We are just gonna have to see where the inflation data fall out."

What's Next

On Wednesday, one piece of inflation data will be revealed. The Consumer Price Index (CPI) inflation April reading will come out from the U.S. Bureau of Labor Statistics. Economists expect it to show that prices cooled to 3.4 percent for the month compared to the 3.5 percent reported in March.

"April's core CPI report could appear encouraging—we expect it to decelerate from March," according to Bloomberg economists.