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**NOVEMBER 3, 2021**

Kuttner on TAP

Fed Resists Pressure to Hike Rates

Will this be sufficient for Biden to reappoint Jerome Powell as Fed
chair?

With many financial commentators pressing for rate hikes based on
supposed market expectations and inflationary pressures, Jerome Powell
gave them an economics lesson.

Speaking at a press conference this afternoon, following the two-day
meeting of the policy- setting Federal Open Market Committee, Powell
explained that the central bank would be starting to modestly reduce its
bond purchases, but would keep interest rates close to zero.

The reason, he explained, is that the economy is still not in full
recovery or at maximum employment. GDP growth and job growth slowed in
the third quarter due to the COVID surge, he explained. And price
increases are not the result of excess demand, but COVID-driven "supply
constraints and bottlenecks."

Therefore, raising interest rates anytime soon would make no sense.
"This is not a classic trade-off between inflation and unemployment."

At the press conference, one financial reporter after another pressed
Powell on the inflation risk, and on people supposedly staying out of
the job market holding out for higher wages.

"People are staying out of the job market because of caretaking and
because of fear of COVID," he correctly countered. Paradoxically,
inflation will come down as COVID subsides and the recovery strengthens,
because workers will have the confidence to rejoin the job market.

I have been a critic of Powell because he is weak on financial
regulation and too casual on conflicts of interest in investments by
senior Fed officials, including his own. But on monetary policy he is
superb, pushing back against both the conventional wisdom and the
Fed's usual bad habit of strangling recoveries.

I remain skeptical about whether his monetary dovishness would continue
if Republicans took over Congress. But today, Powell gave Biden what he
needs if he chooses to reappoint the beleaguered Fed chair.

~ ROBERT KUTTNER

Follow Robert Kuttner on Twitter

Robert Kuttner's latest book is
The Stakes: 2020 and the Survival of American Democracy
.

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A Notorious CIA-Armed Militia Finds a Home in the U.S.

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relocated. BY EMRAN FEROZ

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