Federal Reserve Chair Jerome Powell said the Fed will consider acting more quickly to counter rising inflation and Treasury Secretary Janet Yellen reiterated the importance of Congress dealing with the debt ceiling. Their comments came as they testified in front of the Senate Banking Committee Tuesday.
The committee hearing came just days before the temporary suspension of the debt ceiling ends. Last month, Congress passed a bill that allows the government to continue paying its debts through Dec. 3. Votes on the matter came following a long standoff in the Senate over the debt ceiling.
“I cannot overstate how critical it is that Congress address this issue. America must pay its bills on time and in full,” Yellen said in her prepared testimony. “If we do not, we will eviscerate our current recovery.”
Last Month, Yellen warned that without a hike in the debt ceiling, the U.S. government could default on its debt obligations for the first time soon after Dec. 15.
“In a matter of days, the majority of Americans would suffer financial pain as critical payments, like Social Security checks and military paychecks, would not reach their bank accounts, and that would likely be followed by a deep recession,” Yellen said.
As Yellen discussed the debt ceiling, Powell was grilled by Senate Republicans on inflation, which Powell said himself, “will linger well into next year” in his prepared remarks.
“I’ve been warning about the risks of higher and more persistent inflation since January,” Sen. Pat Toomey (R-PA) said in his opening statement. “Unfortunately, the Fed has decided to continue its emergency monetary policy, adding fuel to the inflationary fire, long after the economic emergency had passed.”
The Fed has begun reducing its monthly bond purchases at a pace that would end those purchases in June. However, Powell testified that Fed officials will discuss tapering more quickly when it next meets in mid-December.
“It is therefore appropriate, in my view, to consider wrapping up the taper of our asset purchases … perhaps a few months sooner,” Powell said. “We understand that high inflation imposes significant burdens, especially on those less able to meet the higher costs of essentials like food, housing, and transportation.”
