The White House said Monday that the three-year battle against rising inflation has reached a “critical turning point” and that protecting progress in the job market is vital.
“Inflation is returning to closer to normal levels, and it's critical to protect the significant labor market progress we've made,” Lael Brainard, director of President Biden's National Economic Council, said in a speech before the Council on Foreign Relations.
His comments come as the Federal Reserve is set to cut interest rates this week for the first time in four years, with officials declaring they have become confident inflation is returning to the 2% target and attention turning to the cooling labor market.
Fed Chairman Jay Powell said in his final speech in Jackson Hole, Wyoming, at the end of August that the Fed would “make every effort to support a strong labor market as we continue to move toward price stability.” He added that the Fed “does not seek or welcome further cooling in labor market conditions” and that the current level of the policy rate gives the Fed “ample room” to lower rates in response to any weakness in the job market.
Brainard said the administration's policies to address supply chain bottlenecks and prevent surges in commodity prices, and its commitment to respecting the Fed's independence, have helped keep inflation down.
“It was a significant contradiction [Biden’s] “This was a repeated criticism of the Federal Reserve's monetary policy by my predecessor during the previous administration,” Brainard said.
Brainard outlined the administration's policies and work, including by building millions of new affordable homes to support housing and providing incentives for states and local areas to remove outdated barriers to construction. She also emphasized the importance of expanding the labor force by subsidizing expensive childcare and investing in clean energy, semiconductors, and AI to create jobs.
“This is a very different approach from an approach that would weaken our economy by undermining the independence of the Federal Reserve and the rule of law, add trillions of dollars to the debt, and impose a sales tax equivalent to $4,000 on middle-class families,” he said.