Joe Biden sought to soothe fears that rising inflation could hurt the US recovery and undermine his $4tn spending plans, saying the administration would remain vigilant about rising prices and that he expected the Federal Reserve to take action if needed.
Speaking from the White House on Monday, the US president touted the burst of job creation and economic growth during his first six months in office as pandemic restrictions were lifted and households benefited from large doses of fiscal stimulus.
But the latest uptick in coronavirus cases due to the spread of the Delta variant and higher-than-expected inflation figures in recent months could jeopardise at least some of the economic bounceback, posing a political problem for the president.
Biden insisted his top officials still believed the current inflation pressures would ease over time, but were not underestimating the risk they would linger.
“I want to be clear: my administration understands that if we were to experience unchecked inflation over the long term, that would pose a real challenge to our economy. So while we’re confident that isn’t what we’re seeing today, we’re going to remain vigilant about any response that is needed.”
The president also said he had recently spoken to Jay Powell, the Fed chair, and stressed that it was important for the central bank to manage inflation effectively.
“The Fed is independent,” Biden said. “It should take whatever steps it deems necessary to support a strong, durable economic recovery.”
The president has been stepping up pressure on Congress to approve $4tn in new spending on infrastructure and the social safety net, which would be deployed over the next decade and paid for with higher taxes on corporations.
But Republicans have seized on rising inflation to build opposition to the plans in Congress, saying the US cannot afford additional government spending proposals that might juice the economy.
Biden has pushed back by arguing that the investments he is proposing — along with his recent executive order promoting greater competition in the private sector — would help reduce prices to benefit consumers over time.
“It will take the pressure off,” he said.
In his remarks, Biden contrasted the US economy’s path under his watch with some of Donald Trump’s warnings of economic collapse during the 2020 campaign.
“It turns out capitalism is alive and very well. We’re making serious progress to ensure that it works the way it’s supposed to work: for the good of the American people,” Biden said.
He said the run-up in prices in recent months was a natural byproduct of the successful reopening of the world’s largest economy.
“As our economy has come roaring back, we’ve seen some price increases. Some folks have raised worries that could be a sign of persistent inflation. But that’s not our view,” Biden said.
“[The] reality is you can’t flip the global economic light back on and not expect this to happen. As demand returns, there’s going to be global supply chain challenges.”