“With the recession over and our strong economic recovery well underway, I am increasingly alarmed that the Fed continues to inject record amounts of stimulus into our economy,” the moderate lawmaker from West Virginia wrote.
“It is imperative we begin to understand that long term policy responses tailored for an economic depression,” Manchin wrote, “may not be what is required for today’s economy and could result in higher than desired inflation if not removed in time.”
Manchin’s critique was not exclusive to the Fed. The Democrat said he is “deeply concerned” that the Fed stimulus, on top of proposals for additional fiscal stimulus, “will lead to our economy overheating and to unavoidable inflation taxes that hard working Americans cannot afford.”
A Fed spokesperson said the central bank has received the letter and plans to respond.
Inflation is here. For how long?
However, Powell, whose term expires in February, acknowledged it “could take some time” for prices to fade. Powell emphasized the Fed won’t hesitate to step in if inflation expectations get out of whack.
‘They need to be careful’
Some Wall Street CEOs and strategists share Manchin’s concerns about inflation and Fed policy.
Rick Rieder, BlackRock’s chief investment officer of global fixed income, wrote in a note that Friday’s jobs report shows the economy is “very close” to maximum employment and may be at risk of an “overheating” in some areas. He urged the Fed to begin tapering its bond purchases.
“The Fed has done a very admirable job in guiding policy through the pandemic period,” Rieder wrote, “but they need to be careful at this stage not to inadvertently undermine much of that progress.”
“Worries that the plan will ignite undesirably high inflation and an overheating economy are overdone,” Mark Zandi, the chief economist at Moody’s Analytics, wrote in a report released last month. “Much of the additional fiscal support being considered is designed to lift the economy’s long-term growth potential and ease inflation pressures.”