Mike Rounds Presses Jerome Powell On How Inflation Rates Are Tied To Biden's Energy Policies

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During a Senate Banking Committee hearing prior to the Congressional recess, Sen. Mike Rounds (R-SD) spoke about President Biden's energy policies and how they affect inflation rates.

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Transcript

00:00Thanks, Senator Tester. Senator Rounds of South Dakota is recognized. Thank you,

00:05Mr. Chairman. Mr. Chairman, first of all, thanks for coming in again and visiting

00:09with us. I just want to focus on two specific items and I'm going to start

00:13with the Basel 3-N game discussion. I think Senator Scott did an excellent job

00:18of kind of laying out the concerns that many of us have had with it. I would like

00:23to go back into just one particular issue, which I think a lot of folks out

00:26there that follow this and I know it's technical in nature, but let me just ask

00:30a specific question and you can kind of pick it apart for me, please. Both you

00:34and Vice Chair Barr have confirmed that there will be material changes to every

00:40risk type outlined in the proposal. Since there will be significant changes, do you

00:46believe where the agencies have landed now would be considered a logical

00:51outgrowth of the original proposal from last summer? For those people who are

00:58not familiar with, that's the legal test for that turns out to be if it's an

01:02illogical outgrowth. If it's not a logical outgrowth, that would require

01:05legally require a re-proposal and I don't want to make the legal judgment. I

01:09will just say again from my standpoint, my view and the and strongly held view

01:14of my some of my colleagues on the board is that it will be appropriate for us to

01:18put out the changes again for a period of comment just because it's the right

01:24thing to do. It's what we would do typically in a situation where there are

01:27you know material changes to it to a proposed rule. Do you feel that you have

01:31a consensus in the board to allow that to move forward in terms of an

01:35additional comment period? Yes, but of course we have to get the the FDIC and

01:40the OCC, you know, we're in discussions with them to work to work on

01:45something that would meet that need and we have to get their agreement too.

01:49Assuming it sounds like that's the path that you would like to go down. Yes. If

01:55that were the case, would it be fair to say that we'd probably be looking at

01:59final determinations or recommendations for a Basel III endgame proposal

02:04probably in the next year before it would become anything of a final

02:09determination? I think that that may be right, you know, it's some that's

02:15something like that could be right, yeah. I mean it's it's you can't be it's hard

02:18to be precise, you know, we would put it out, it takes some time to write this

02:21stuff up, then you put it out for comment, then you get the comments, then you read

02:25the comments, then you write the final rule, you know, beginning part of next

02:29year is a good good guesstimate. The only reason why I push it is because there are

02:33so many folks directly involved with this and the impact on our economy here

02:37and with a lot of our financial institutions, this is a significant

02:40change and it's one that a lot of people are following, so I'm trying to get you

02:43to to get into the the depth of this as much as possible and I thank you for

02:47that. I'd also want to go into one other area and once again this is something

02:51you and I have had visits about in front of this group before, but I want to talk

02:56about what what the parts of inflation are and what parts you can control and

02:59what parts as the Fed you really can't control. The demand side of the equation

03:05on inflation is the part that you have the tools to work with, but there is the

03:10supply side of the equation which is still out there and I want to just lay

03:14this out because as we do this in this setting it naturally becomes political

03:18in nature because the one of the the starting points that we talk about is

03:22when this administration took office and what happens with supply side issues at

03:26that time and as I work my way through this I just want to share the concern

03:30that I've got and then I recognize you don't want to be political in it but I

03:34want to lay this out and then I want to talk about what you can control and what

03:37you can't control with regard to making changes on inflation through the

03:41processes that you have. When President Biden took office gasoline prices since

03:48President Biden took office gasoline prices have risen over 54 percent, energy

03:55prices have risen 41 percent, fuel oil prices have risen 37 percent. Now I can

04:03go on and on but you understand what I'm saying is is energy has increased

04:07substantially and I think one of the reasons for this has been additional

04:11demand as we've come out of a pandemic, but the other part of this has been

04:14whether or not investors really want to go back in and invest in traditional

04:18energy resources after the president made this specific determination to

04:22cancel the Keystone XL pipeline on the day that he stepped into office. When he

04:27did that he sent one heck of a message to investors about traditional energy

04:31and investing in traditional energy in the United States and the fact that a

04:34multi-billion dollar contract or contract could be canceled with a stroke

04:39of a pen. Now my question to you is what percent or it has there been a

04:46discussion about what percent or what amount of the inflation that we've seen

04:51over 20 percent increase in terms of affordability for a lot of our products

04:56how much of that is attributable to the demand side and how much of it really is

05:00attributable to supply side challenges that we've seen in this country?

05:05That's a question that we've thought about a lot and you any attempt to

05:10reduce that to a precise number would be inappropriate because it's so uncertain

05:16but I think we can say I can I believe strongly there's a significant demand

05:20element and there's a significant supply element and we've seen the supply side

05:24heal so much over the course of the last year or so and we clearly see that that's

05:28contributing to lower inflation we also see cooling demand for example in the

05:32labor market so the two forces are working together I can't really break it

05:35down it wouldn't be it would be such an imprecise estimate just simply a record

05:40just simply an acknowledgement though that it is both demand it's stuff and it

05:44is supply it is both yeah thank you sure thank you mr. chairman my time has

05:49expired

Mike Rounds Presses Jerome Powell On How Inflation Rates Are Tied To Biden's Energy Policies

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