Federal Reserve Chairman Jerome Powell contradicted President Joe Biden on Wednesday, explaining the ongoing inflation crisis is not being driven primarily by Russian President Vladimir Putin.
As recently as Monday, the Biden administration called the Ukraine war "the biggest single driver of inflation."
What did Powell say?
While Powell testified before the Senate Banking Committee, Sen. Bill Hagerty (R-Tenn.) asked Powell whether Biden's narrative — that Putin and the Ukraine war are responsible for America's inflation crisis — is true.
"I realize there are a number of factors that play a role in the historic inflation that we’re experiencing: supply chain disruptions, regulations that constrain supply, we’ve got rising inflation expectations and excessive fiscal spending, But the problem hasn’t sprung out of nowhere," Hagerty said. "In January of 2021, inflation was at 1.4%. By December of 2021, it had risen to 7% — a fivefold increase. Now, since the war in Ukraine began in late February, the rate of inflation has risen incrementally another 1.6% to a current level of 8.6%. So again, from 7% to 8.6%.
"Given how inflation has escalated over the past 18 months, would you say that the war in Ukraine is the primary driver of inflation in America?" the senator then asked.
It took just one sentence for Powell to crush Biden's narrative.
"No, inflation was high before, certainly before the war in Ukraine broke out," Powell admitted.
LIVE: Fed Chair Jerome Powell testifies before Senate Banking Committee on monetary policy — 6/22/22 youtu.be
Because of high inflation — which topped 8.6% in May — Powell told Congress on Wednesday that aggressive action taken by the Federal Reserve, which is necessary to combat inflation, could trigger a recession.
"It’s certainly a possibility," Powell said.
Former Treasury Secretary Larry Summers, on the other hand, believes a recession is all but guaranteed, precisely because of the Fed raising interest rates.
"Look, nothing is certain, and all economic forecasts have uncertainty," Summers said Sunday on NBC. "My best guess is that a recession is ahead.
"I base that on the fact that we haven't had a situation like the present with inflation above 4% and unemployment beyond 4% without a recession following within a year or two," he explained. "And so I think the likelihood is that in order to do what's necessary to stop inflation the Fed is going to raise interest rates enough that the economy will slip into a recession."