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On Wednesday, March 2, 2022, at 10:00 a.m. (ET) full Committee Chairwoman Waters and Ranking Member McHenry will host a hybrid hearing entitled, “Monetary Policy and the State of the Economy."
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Witness for this one-panel hearing will be:
• The Honorable Jerome H. Powell, Chair Pro Tempore, Board of Governors of the Federal Reserve System
Purpose and Background
The Federal Reserve Act directs the Chairman of the Board of Governors (Board) of the Federal Reserve System (Federal Reserve or Fed) to testify before the House Committee on Financial Services and the Senate Committee on Banking, Housing, and Urban Affairs twice a year on how the Board handles monetary policy and its observations on economic developments. Each appearance requires the Board to supply the committees with a written report known as the Monetary Policy Report. The Federal Reserve System consists of a 7-member Board of Governors, as well as 12 Reserve Banks located in various regions around the country. The Fed’s functions include conducting monetary policy, promoting financial stability, supervising and regulating certain financial institutions, and fostering payments and settlements. The Board has seven Governors, including a Chair, a Vice Chair, and a Vice Chair for Supervision. Monetary policy decisions are made by the Federal Open Market Committee (FOMC), which is comprised of the Board, the president of the Federal Reserve Bank of New York, and an annual rotation of four of the remaining Reserve Bank presidents.
In February 2022, Chair Powell’s first term as Chair expired, and he has been designated Chair pro tempore pending Senate confirmation to the second term to which President Biden has nominated him. In addition to nominating Chair Powell for another term as Chair, President Biden has made four other Board nominations: Governor Lael Brainard has been nominated to serve as Vice Chair; Sarah Bloom Raskin has been nominated to serve on the Board as Vice Chair for Supervision; and Lisa Cook and Philip Jefferson have been nominated to vacancies on the Board. All five nominees are awaiting Senate confirmation. If all five are confirmed, the Board will have more racial and gender diversity than ever before, and it will be the first time that the Board has had all seven governors confirmed since August 2013.
In February 2022, the Boston Federal Reserve Bank board announced that University of Michigan provost Susan Collins will become the new Boston Fed president effective July 1. The board of the Dallas Federal Reserve Bank has initiated its search for a new president, but it has not yet announced a decision. For years, gender, racial, and occupational diversity among the directors of the 12 Federal Reserve Banks has been lacking, though there has been gradual improvement in recent years. There are very few people of color among the top economic research staff across the Federal Reserve System. According to the 2020 Office of Minority and Women Inclusion report, the Board's total workforce in 2020 was 43 percent minority and 43 percent female. Susan Collins will become the first Black woman to serve as a Reserve Bank president in July, and Lisa Cook will be the first Black woman to serve as a Federal Reserve governor if confirmed. To date, there has never been a Latinx FOMC participant in the Fed’s history.
Overall Economic Outlook, Inflation, and Monetary Policy
Economic conditions and labor market recovery from the COVID-19 pandemic have shown remarkable strength over the past year. In January 2022, the Bureau of Labor Statistics (BLS) jobs report showed 467,000 jobs added to the economy, bringing the total number of new jobs added since January 2021 above 7 million. Wages and salaries for workers grew by 4.5% in 2021, the highest level since 1983. Despite a robust pace of economic recovery and job growth, key challenges remain. The Black unemployment rate remains elevated and nearly double that of the White unemployment rate, falling below 7% in January after climbing slightly in December. According to Chair Powell, labor force participation “remains subdued,” which he attributed partially to “caregiving needs and ongoing concerns about the virus.”
Throughout 2021, inflation readings came in higher than the Fed had projected. Largely in response to this inflationary trend, Chair Powell announced plans to accelerate the Fed’s “taper” of largescale asset purchases (LSAPs) of Treasuries and mortgage-backed securities and bring LSAPs to an end in early March. It is now expected that the FOMC will begin raising interest rates at the conclusion...
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