- Joe Raedle/Getty Images
- Donald Trump’s Fed board nominee, Marvin Goodfriend, got an earful from Democratic senators during his confirmation hearing.
- Senators Warren, Menendez pointed to Goodfriend’s spotty forecasting record, including premature arguments for the Fed to raise interest rates when the unemployment rate was still very high.
- “It would be a mistake to put you on the Fed board,” Warren said.
Marvin Goodfriend, one of President Donald Trump’s nominees for the Federal Reserve’s board, found himself on the defensive at his confirmation hearing after Democrats accused him of belittling the central bank’s “dual mandate” which forces policymakers to focus not only inflation but also unemployment.
Goodfriend, previously a senior staff economist at the Richmond Fed, is widely seen as an inflation hawk, and was warning the Fed’s response to the Great Recession would generate an inflation spike. That has never transpired, and instead, US inflation continues to undershoot the Fed’s 2% target.
Senator Elizabeth Warren took him to task for calling on the Fed to tighten monetary policy when the unemployment rate was still as high as 7%. US unemployment has since plunged to 4.1% and yet inflation is nowhere to be seen, according to most major indicators.
“I’m concerned because these wrong predictions are not outliers for you – they have been part of your overall approach to monetary policy which effectively ignores the Fed’s full employment mandate and instead focuses solely on speculative concerns about inflation,” Warren said.
“Based on the kind of judgment that you have demonstrated, American families are very lucky that you weren’t on the Fed board over the past several years and I think it would be a mistake to put you on the Fed board now,” she said.
When Warren pressed him specifically on his call about the risks of high inflation being wrong, Goodfriend admitted: “Absolutely.”
Still, Goodfriend missed a key chance to explain why his reasoning was wrong and why the economy behaved in a way that was not consistent with his worldview, choosing instead to dance around the issue and duck the senators entirely fair questions.
“Those statements are out of context,” he insisted. “The context was I think for this comment that I was saying if you look only at the unemployment rate but not the inflation rate.”
Senator Bob Menendez called out Goodfriend’s skepticism, expressed in prior Congressional testimony, of the value of the Fed’s dual mandate.
“During a hearing last May you called the Federal Reserve’s dual mandate ‘incoherent’ and you suggested it be eliminated,” Menendez said.
The Fed’s mandate is set by Congress, not Fed officials. The dual mandate was introduced into the Federal Reserve Act in 1977.