The House Financial Services Committee, under the leadership of Chairman French Hill (AR-02), is conducting a hearing on the Federal Reserve's Semi-Annual Monetary Policy Report. Chairman Hill addressed several issues in his opening remarks, emphasizing the impact of inflation over the past four years.
Chairman Hill stated, "For the last four years, inflation has crushed Americans. Today, it takes $1.21 to purchase what cost $1.00 in January of 2021, as measured by the Consumer Price Index." He attributed this situation to "a combination of irresponsible fiscal policy and supply chain disruptions" as well as a Federal Reserve that was “fighting the last war” for too long.
Hill also highlighted discussions with Chairman Powell regarding assumptions made by the Fed and others that pre-pandemic low inflation and interest rates would persist. He noted that this assumption led to a change in monetary policy framework in August 2020, which was followed by rising inflation starting in March 2021.
"In hindsight," Hill said, "the adoption of so-called 'flexible average inflation targeting' appears ill-timed and ill-fitted to the post-pandemic world." He urged for consideration of lessons learned over recent years as the Fed reviews its monetary policy framework.
Despite progress on inflation control, Hill quoted Bank of America's economist Stephen Juneau: "Inflation is stuck above target… with risks to the upside." With inflation currently above target at 3%, Hill acknowledged positive economic indicators such as low unemployment and solid GDP growth but cautioned against potential risks from resurging inflation.
Hill expressed concern about potential further price increases impacting Americans due to what he referred to as "President Biden’s inflation." Such increases could lead to another tightening cycle by the Fed affecting mortgages and loans.
He stressed, "The fact is: over the past decade, we have witnessed too many distracting ‘mandates’ diluting the Federal Reserve’s core mission of price stability."
Hill also touched on other responsibilities of the Fed including bank regulation and supervision. He criticized perceived overreach during Vice Chair for Supervision Michael Barr's tenure citing proposals like raising bank capital levels without Congress' authorization. According to Hill, these actions violated established procedures.
"The Fed needs to focus on core banking risks," he asserted while urging adherence to Congressional laws.
Concluding his remarks, Hill emphasized maintaining Federal Reserve independence for long-term benefits: "The Fed has a chance right now to get back on track and preserve its independence for the long-term benefit of American People."