Top Republicans warn Fed that risks being “behind the curve” of inflation
Fresh from a breakfast with Jay Powell, Pat Toomey sat in his Washington office this week with mixed reviews on the Federal Reserve chair.
“Well, he’s a very capable guy,” the 59-year-old Republican senator from Pennsylvania said in an interview with the Financial Times. “He and I have a significant disagreement over the size of the accommodation and how much has been spent. But I have a lot of respect for him personally. ”
Toomey has emerged as a congressional critic of the Biden administration’s strong fiscal response and the Fed’s ultra-easy monetary policy, challenging the prevailing “go big” mantra in Washington.
Toomey declined to say whether he would support Powell for a second term starting next year if Joe Biden, president of the United States, decides to extend the mandate of the Fed chair. But he was vocal about where he thinks the Fed makes mistakes.
The central bank is in danger of being “behind the curve” of inflation, and the Fed’s insistence that the current rise in consumer prices will be temporary “we have to wait to see if it goes away.” go, ”Toomey said. “Everything just increases the risk that they will end up having to take more severe actions.”
Toomey feels a faltering change may already be underway, however, after Fed officials signaled that they were expecting an increase in interest rates. to begin in 2023, and launched a debate on the reduction or “decrease” in central bank asset purchases.
“The reality is that the reduction in delays is about to begin. And I’ll be shocked if it doesn’t start early next year, maybe even earlier. And I think the markets expect that, and the markets can absorb that, ”he added.
Toomey has been in the U.S. Senate since 2011, after first leading the Club for Growth, a conservative anti-tax group, and serving in the House of Representatives.
During the interview he warned Republicans who, if they choose primary candidates aligned with former President Donald Trump, risk losing their chances of winning control of Congress in elections by the end of 2022.
But he believes his party should otherwise have a strong case against Democrats next year, even if the economy recovers and national polls show that many of Biden’s measures, including stimulus controls, remain popular.
“Every stop I make in Pennsylvania. I feel like people are really worried that, “how can we be spending money at this rate – It’s like someone in Washington thinks this is Monopoly money, but it’s not,” he said.
Before entering politics, Toomey was a derivatives trader, and is now the first Republican on the Senate banking committee and a member of the Senate finance committee. Together, the two panels oversee the Fed, Treasury, SEC and USTR, with primary roles in drafting fiscal, spending and financial legislation.
Toomey was talking on the eve of Biden deal with with a group of centrist senators from both parties to raise $ 1 tn in addition to federal funds in infrastructure spending for the next eight years.
Toomey said he expected the deal to happen, but he wasn’t even sure of the details. He was pleased that it did not include any tax increases, and was limited to physical infrastructure, two key Republican requirements.
But it was not clear he was paid in a credible way, he said. Financing mechanisms include better tax enforcement, unused stimulus money, as well as mobile phone spectrum sales and strategic oil reserves.
After the agreement was reached on Thursday, he tweeted: “A framework is not legislation, and the text itself counts. I look forward to reviewing it further in the coming weeks.”
One of Toomey’s biggest, but quixotic, party efforts has been to make a bipartisan agreement on arms reform. He first partnered with Democrat Joe Manchin on a proposal to demand background checks on all private gun sales in 2013, following the Sandy Hook massacre. Today, he acknowledges the “probabilities are not good” for the bill to become law.
“I haven’t had much success, convincing my Republican colleagues to do something for him,” he said, adding that the recent turmoil and financial collapse in the National Rifle Association, the main lobby group for gun owners , will have little to do to change the dynamics.
“If the NRA leaves tomorrow, there would be a replacement,” he said. “[It] it will emerge because there are many people who feel very strongly about their Second Amendment rights. ”
To the banking committee, Toomey attacked what he described as the “mission of scrutiny” of agencies such as the Fed and the SEC on climate policy and other “ESG” goals.
And he described the rise of “stakeholder capitalism” as the biggest strain on relations between Republicans and businesses.
“To the extent that companies weigh in on culture wars, so to speak, it creates tension,” Toomey said. “I think that’s a bigger problem for a lot of Republicans right now than the whole Trump episode.”