AILSA CHANG, HOST:
Jerome Powell will continue to lead the fight against high inflation. This afternoon, the Senate confirmed Powell to serve a second term as chairman of the Federal Reserve. It is one of the most powerful economic jobs in the country, affecting everyone who carries a credit card or a home mortgage. And it is an especially challenging job right now when the Fed is under intense pressure to rein in soaring prices.
For more on this, we're joined now by NPR's Scott Horsley. Hey, Scott.
SCOTT HORSLEY, BYLINE: Hi, Ailsa.
CHANG: All right. So when you look back at Powell's first term as Fed chair, I mean, it was marked by the onset of the pandemic and all the economic turmoil that followed. How do you think his second term's shaping up so far?
HORSLEY: Well, it's going be very different but certainly not much easier. When the pandemic first hit two years ago, 22 million people were thrown out of work. The Fed slashed interest rates close to zero and tried to prop up the economy and speed the return to full employment. Powell and his colleagues were pretty successful in that effort, but that also contributed to the really high inflation we've got now. You know, inflation was running at 8.5% in March. It was almost that high in April. So now the Fed has done a quick about-face, and it started to raise interest rates at a rapid clip to try to tamp down demand and cool off these big price hikes.
CHANG: OK. So lower inflation does sound pretty good, but what are the risks of this approach?
HORSLEY: The danger is that by making it more expensive to borrow money, the Fed doesn't just chill demand but smothers it and sends the economy into recession. Critics say that danger is heightened because the Fed waited so long to act and let inflation get so high.
Now, Powell and his colleagues have said they think the job market is strong enough to weather these higher interest rates without a big jump in unemployment. But Powell has also made it clear he's determined to do whatever it takes to get inflation back down and restore price stability.
(SOUNDBITE OF ARCHIVED RECORDING)
JEROME POWELL: There may be some pain associated with getting back to that. But, you know, the big pain is in not dealing over time, is in not dealing with inflation and allowing it to become entrenched.
HORSLEY: The Fed raised interest rates by half a percentage point last week, which was the biggest jump in more than 20 years. And Powell has signaled that two more similar-sized rate hikes are likely in June and July. Rising interest rates and the fear of recession are what's behind the steep drop we've seen in the stock market in recent days.
CHANG: Yeah. OK. Well, Powell's confirmation vote was bipartisan, but it does cap a pretty bitter fight in the Senate over leadership at the central bank. And I'm curious, what was the breakdown of the vote on him today?
HORSLEY: The vote for Powell was pretty lopsided, actually - 80-19 - which is rare in a polarized environment like we're in. But it's actually not that unusual for the Fed. The central bank is supposed to be pretty insulated from partisan politics. Powell, who is a Republican, has carefully courted lawmakers on both sides of the aisle, and he's won a lot of bipartisan respect. He was originally appointed to the Fed board by former President Obama. He was promoted to chairman by then-President Trump and now reappointed by President Biden.
Ohio Senator Sherrod Brown, who's a Democrat that chairs the committee that oversees the Fed, says Powell has earned the chance for a second term.
(SOUNDBITE OF ARCHIVED RECORDING)
SHERROD BROWN: He played an instrumental role in stabilizing our economy in the face of the coronavirus pandemic. He's been a reliable voice and a steady hand through this crisis.
HORSLEY: Other Fed nominees this year have faced much more contentious confirmation battles, though. Sarah Bloom Raskin was forced to drop out. Another board nominee, Lisa Cook, was passed on a straight party-line vote. So partisanship is chipping away at the Fed's political insulation. And that's going to be one more challenge for Chairman Powell, especially as Republicans try to weaponize inflation to score points in the midterm elections.
CHANG: That is NPR's Scott Horsley. Thank you, Scott.
HORSLEY: You're welcome.
NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.