Federal Reserve Chairman Jerome Powell on Wednesday broke with President Biden’s repeated attempts to blame Russian President Vladimir Putin’s invasion of Ukraine for the highest inflation in 40 years.
Powell, confirmed last month to a second term as chairman, explained to the Senate Banking Committee that “inflation was high before” the Feb. 24 Russian invasion of Ukraine, which increased global food and energy prices.
Sen. Bill Hagerty (R-Tenn.) elicited the remark from Powell at a committee hearing after laying out the fact that inflation grew higher over the course of 2021.
“I realize there are a number of factors that play a role in those historic inflation that we’re experiencing — supply chain disruptions, regulations that constrain supply, we’ve got rising inflation expectations and excessive fiscal spending, but the problem hasn’t sprung out of nowhere,” Hagerty said.
“In January of 2021, inflation was at 1.4%. By December of 2021, it had risen to 7% — a fivefold increase. Now, since the war in Ukraine began in late February, the rate of inflation has risen incrementally another 1.6% to a current level of 8.6%. So again, from 7% to 8.6%.”
Hagerty asked Powell, “Given how inflation has escalated over the past 18 months, would you say that the war in Ukraine is the primary driver of inflation in America?”
“No, inflation was high before — certainly before the war in Ukraine broke out,” Powell said.
“I’m glad to hear you say that,” Hagerty replied. “The Biden administration seems to be intent on deflecting blame and as recently as just this past Sunday spread the misinformation that Putin’s invasion of Ukraine is the ‘biggest single driver of inflation.’ I’m glad you agree with me that that’s not the truth.”
For months, the White House has sought to brand the highest inflation since 1981 as “Putin’s Price Hike.”
“Putin’s Price Hike hit hard in May here and around the world: high gas prices at the pump, energy, and food prices accounted for around half of the monthly price increases,” Biden said in a statement this month after data showed annual US inflation crept higher to 8.6% in May from 8.3% in April.
In response to questioning from Sen. Kyrsten Sinema (D-Ariz.) on Wednesday, Powell said fuel and food prices clearly were influenced by the war in Ukraine — even if most of the annual jump in prices was unrelated.
“The increase in commodity prices are clearly connected to to the war in Ukraine. And so that that part of inflation would be certainly much lower than it is without the war in Ukraine,” Powell said.
The Federal Reserve, meanwhile, is increasing interest rates in an attempt to rein in inflation.
Republicans, centrist Democrats, Amazon/Washington Post owner Jeff Bezos and — on at least one occasion — Biden himself have said that massive government spending helped spur inflation, including last year’s $1.9 trillion American Rescue Plan Act.
Inflation in the US in May — 8.6% — was higher than in many other Western countries. The Eurozone’s average was 8.1%, Canada reported 7.7% and South Korea reported 5.4% annual inflation for that month.
A study released in late March by researchers at the Federal Reserve Bank of San Francisco said that in the final quarter of 2021, about 3 percentage points of US inflation — or roughly half of it at the time — may have been caused by government pandemic spending .