Of all people one might expect to finally blow the whistle on the Federal Reserve, a Democratic Senator may not have been at the top of the list of expectations.
But that's exactly what happened yesterday when U.S. Senator Joe Manchin (D-WV) put out a press release urging the Federal Reserve to "not overheat our economy". The press release included a letter to Fed Chairman Jerome Powell that expressed serious concern about too much quantitative easing and the inflation "tax" that was resulting for middle class America.
"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 by continuing an emergency level of quantitative easing (QE) with asset purchases of $120 billion per month of Treasury securities and mortgage backed securities," Manchin's letter read.
Manchin continued, raising warning flags about inflation:
"The Fed has sustained $120 billion per month in asset purchases since June 2020, despite increasing vaccination rates to combat the virus and additional fiscal stimulus from Congress in the ARP. The record amount of stimulus in the economy has led to the most inflation momentum in 30 years, and our economy has not even fully reopened yet. I am deeply concerned that the continuing stimulus put forth by the Fed, and proposal for additional fiscal stimulus, will lead to our economy overheating and to unavoidable inflation taxes that hard working Americans cannot afford."
"Simply put, our monetary and fiscal stimulus response met the moment of crisis when our economy suffered the medical equivalent of a heart attack. But, now it’s time to ensure we don’t over prescribe the patient by further stimulating an already strong recovery and therefore risk our ability to respond to future crises we are sure to face," his letter said.
It concluded with Manchin urging Powell to reassess the FOMC's stance: "I urge you and the other members of the Federal Open Market Committee to immediately reassess our nation’s stance of monetary policy and begin to taper your emergency stimulus response. While I appreciate your commitment to maximum employment and stable prices, it is imperative we begin to understand that long term policy responses tailored for an economic depression, like the Great Depression and Great Recession of 2008, may not be what is required for today’s economy and could result in higher than desired inflation if not removed in time."
Here is a full copy of the letter: