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Democratic Senator Joe Manchin Sounds Alarm About Inflation Threat

   DailyWire.com
Senator Joe Manchin, a Democrat from West Virginia, speaks during a news conference in the Dirksen Senate Office Building in Washington, D.C., U.S., on Wednesday, July 28, 2021. A bipartisan group of senators and the White House reached a tentative agreement on a $550 billion infrastructure package, a significant breakthrough in the drive to muscle through Congress a massive infusion of spending for roads, bridges and other critical projects.
Stefani Reynolds/Bloomberg via Getty Images

Sen. Joe Manchin (D-WV) has asked the Federal Reserve to taper its monetary stimulus.

Despite rising inflation, the Federal Open Market Committee — which oversees the execution of monetary policy in the United States — has so far declined to amend its near-zero interest rate target or scale back its $120 billion in monthly asset purchases. 

Manchin argued in a Thursday letter to Fed Chair Jerome Powell that the stimulus is no longer merited given the American economy’s rebound:

With the recession over and our strong economic recovery well underway, I am increasingly alarmed that the Fed continues to inject record amounts of stimulus into our economy by continuing an emergency level of quantitative easing (QE) with asset purchases of $120 billion per month of Treasury securities and mortgage backed securities. 

The record amount of stimulus in the economy has led to the most inflation momentum in 30 years, and our economy has not even fully reopened yet. I am deeply concerned that the continuing stimulus put forth by the Fed, and proposal for additional fiscal stimulus, will lead to our economy overheating and to unavoidable inflation taxes that hard working Americans cannot afford. 

While I appreciate your commitment to maximum employment and stable prices, it is imperative we begin to understand that long term policy responses tailored for an economic depression, like the Great Depression and Great Recession of 2008, may not be what is required for today’s economy and could result in higher than desired inflation if not removed in time. 

On Tuesday, Fed Board of Governors member Christopher Waller provided one of the first hints that the central bank will begin tapering this fall.

In an interview with CNBC, Waller — who sits on the Federal Open Market Committee — said that monetary and fiscal stimulus has attained its objectives.

“In my opinion, that’s substantial progress and I think you could be ready to do an announcement in September,” he explained, adding that if the next two jobs reports “come in as strong as the last one, then I think you’ve made the progress you need.” If they do not, “then you’re probably going to have to push things back a couple months.”

“In my view, with tapering we should go early and go fast in order to make sure we’re in position to raise rates in 2022 if we have to,” he asserted. “I’m not saying we would, but if we wanted to, we need to have some policy space by the end of the year.”

Waller said that he had heard “anecdotal evidence” that business contacts are able to pass higher prices on to consumers. “They fully intend to. They’ve got pricing power for the first time in a decade. Those are the sorts of issues that make you concerned that this may not be transitory.”

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