(RoyalPatriot.com )- In a complete change of approach from his predecessor, President Joe Biden is remaining silent as the Federal Reserve is likely to increase interest rates in the near future, perhaps as early as March.
The Fed met for the first time in 2022 on Tuesday, and most members agreed that the time has come for interest rates to go up. It’s likely to be the first of possibly three interest rate hikes this year.
The last time the Fed raised the interest rate multiple times in a year, 2018, then-President Donald Trump blasted Chair Jerome Powell for the action. Ironically, Trump had only just installed Powell as the chair of the Fed, and the president wasn’t happy that he was taking matters into his own hands and working, as Trump said, to undercut efforts the president was taking to spur economic growth.
In a starkly different approach, Biden has either been completely silent or publicly supported the moves the Fed has announced to combat rising inflation. That includes the three interest rate hikes this year, plus trying to shrink the $9 trillion it has on the balance sheet.
Biden even called these policy changes “appropriate” last week, and then reiterated that it was up to the Fed itself to make the appropriate decisions.
While the Fed says these moves will help to combat out-of-control inflation, they are all likely to make it much costlier to borrow money.
Times are much different now than they were under Trump. In the four years that Trump was in the White House, prices of consumer goods increased at an annual pace of approximately 2%, never increasing faster than 3%.
In the first year Biden was in office, consumer prices increased a massive 7%. Demand for nearly every major consumer good far outpaced the ability of the economy as a whole to meet that demand.
Sarah Binder, who works for George Washington University and authored a book on Federal Reserve governance, commented recently:
“Biden understands that the Fed’s performance will influence the course of the economy and thus help to shape his and the Democrats’ electoral fortunes.”
The problem is that rapidly-increasing prices are far outweighing the wage gains people are experiencing at their jobs. This is making everyday expenses very costly, and has strained people’s bank accounts.
All of this, of course, also comes at a time when the federal government is no longer really supporting the American people directly as pandemic-related assistance such as unemployment boosts, advanced child care tax payments and stimulus checks have all expired.
The person receiving a brunt of the blame for that is Biden, who’s approval ratings continue to slump significantly.
Biden is making a pretty serious bet on the Fed’s ability to get the country out of the inflationary hole it currently finds itself in. If he is successful in short order, then Democrats might fare relatively well in the midterm elections later this year.
But, if Biden is wrong, Democrats are likely to lose control of both chambers of Congress — plus be set up for major failure in the presidential election in 2024.
