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Fed will hike rates regardless if Biden’s nominees are confirmed,


Federal Reserve Chairman Jerome Powell leaves a meeting in the office of Sen. Chris Van Hollen, D-Md., in Hart Building on Wednesday, October 6, 2021.

Tom Williams | CQ-Roll Call, Inc. | Getty Images

There may be plenty of reasons to confirm President Joe Biden’s nominees to the Federal Reserve, but economists say concern that the central bank won’t act to rein in inflation shouldn’t be among them.

It is virtually guaranteed that the Fed will hike interest rates next month to combat rising prices even if Sarah Bloom Raskin, Lisa Cook and Philip Jefferson are yet to be confirmed by the Senate, according to three economists who spoke with CNBC.

The Fed is “going to raise rates in March,” said Jason Furman, who served as chair of the Council of Economic Advisers in the Obama administration. “The only question is, do they raise by 25 basis points or 50 basis points?”

The White House and top Democrats have in recent days raised concerns that without a fully staffed Fed board of governors, the central bank will lose its edge on rising prices. But economists suggested the urgency behind that messaging is politically motivated and that the Fed’s chances to quell inflation aren’t tied to this confirmation process.

The White House did not immediately comment before publication.

Democrats on the Senate Banking Committee are frustrated with an ongoing Republican boycott that is preventing them from advancing all five of the president’s Fed nominees, including current board members Chair Jerome Powell and Lael Brainard.

The GOP says the main reason behind their blockade is concern over Raskin, her views on climate policy and her prior work for fintech company Reserve Trust.

But economists who are tracking the inflation outlook say the Fed is equipped to curb inflation even if the politics stays messy.

Furman said lawmakers should take comfort in the fact that the Fed has already telegraphed several rates hikes ahead.

“I don’t think [the nominees] dramatically change the course of monetary policy one way or the other in the near future,” Furman, now a professor of economics at Harvard University, said of Raskin, Cook and Jefferson.

The Fed, the globe’s most powerful central bank, is tasked by Congress to maximize employment and keep inflation in check through adjustments to interest rates. It tends to raise borrowing costs when it feels the economy may be overheating, and it cuts rates in times of economic duress.

It slashed rates to near zero in the spring of 2020 as the Covid-19 pandemic swept across the world and forced thousands of businesses nationwide to close. But now, with vaccines widely available and annualized inflation running north of 7%, the Fed is widely expected to make it more expensive to borrow throughout 2022.

Investors say there’s a 71% chance the Fed raises the overnight lending by 25 basis points at its March meeting, while 29% are betting they go big with a 50-basis-point jump, according to the CME Group’s FedWatch tool.

But with Republicans…


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