On The Money — Powell pivots as inflation rises

Happy Tuesday and welcome to On The Money, your nightly guide to everything affecting your bills, bank account and bottom line. Subscribe here: thehill.com/newsletter-signup.

Today's Big Deal: Federal Reserve Chair Jerome Powell says the central bank may pull back on stimulus quicker than they expected. We'll also look at how the omicron variant of the coronavirus is raising uncertainty for the global economy.

But first, find out about the French flying taxis.

For The Hill, we're Sylvan Lane, Naomi Jagoda and Aris Folley. Reach us at slane@thehill.com or @SylvanLane, njagoda@thehill.com or @NJagoda and afolley@thehill.com or @ArisFolley.

Let's get to it.

Powell says Fed will consider faster taper amid surging inflation

Federal Reserve Chairman Jerome Powell said Tuesday that high inflation has spread beyond areas of the economy most affected by COVID-19 and may prompt the bank to pull back on stimulus sooner.

In a Tuesday hearing before the Senate Banking Committee, Powell said that stronger economic growth and faster price increases across the U.S. economy could push the Fed to taper its monthly bond purchases at a faster rate than initially planned.

"We're now looking at an economy that's very strong and inflationary pressures that are high," Powell said, flanked by Treasury Secretary Janet Yellen. He added it may be "appropriate to wrap up our purchases a few months earlier" than expected.

The background:

• The Fed has purchased at least $120 billion in Treasury bonds and mortgage-backed securities each month since March 2020 to help keep borrowing costs low as the U.S. recovered from the coronavirus recession.

• The bank announced last month it would purchase roughly $70 billion in Treasury bonds and $35 billion in mortgage bonds in November, a reduction of $10 billion and $5 billion, respectively, and continue at a similar rate until the purchases end.

• Even so, the Fed has faced growing pressure to accelerate the pace of that taper as consumer and producer prices rise quickly across the economy.

"Generally the higher prices we're seeing are related to the supply and demands, imbalances that can be traced directly back to the pandemic and the reopening of the economy," Powell said Tuesday.

"But it's also the case that price increases have spread much more broadly in the recent few months across the economy, and I think the risk of higher inflation has increased," he continued, adding that high inflation will last "well into next year."

Sylvan has more here.

LEADING THE DAY

New variant raises questions about air travel mandates

The emergence of the omicron variant has caused the White House to revisit questions over whether to impose vaccine mandates for domestic air travel, especially as travel picks up for the holiday season.

• The White House said nothing is off the table as the country braces for the new variant to spread to the U.S.

• A move to mandate vaccines for domestic air travel or require testing would be controversial and likely hotly contested, but the Biden administration isn't shutting down the idea.

"He wasn't taking any options off the table, but he's going to rely on the advice of his health and medical experts," White House press secretary Jen Psaki told reporters on Monday, referring to President Biden, when asked why there aren't testing or vaccination requirements for domestic air travel.

The threat of the new variant comes as Americans are preparing to travel for Christmas, which could yield the most pandemic travel since the Thanksgiving rush. Alex Gangitano has more here.

Read more: The emergence of a new COVID-19 variant is raising fresh uncertainty for the U.S. economy, even as President Biden vows that the country will not see more lockdowns.

SALT MINE

Senators huddle on path forward for SALT deduction in spending bill

A group of Senate Democrats met Tuesday to discuss how to address the state and local tax (SALT) deduction in the social spending and climate package, seeking to make progress on a key issue where Democrats have yet to reach an agreement.

Senators said following the meeting that they did not come to a resolution on the issue but were nonetheless upbeat about the discussions.

Sen. Jon Tester (D-Mont.) said he thinks there is a "path forward." And Sen. Bernie Sanders (I-Vt.), another critic of the SALT deduction, similarly told reporters it was a "good discussion."

Naomi has the latest here.

CROWING ABOUT THE DEBT LIMIT

Trump: McConnell must use debt limit to crush Biden agenda

Former President Trump on Tuesday urged Senate Republicans to use the federal debt limit as leverage to defeat President Biden's social spending and climate bill.

"Old Crow Mitch McConnell, who is getting beaten on every front by the Radical Left Democrats since giving them a two-month delay which allowed them to 'get their act together,' must be fully prepared to use the DEBT CEILING in order to totally kill the Democrat's new Social Spending (Wasting!) Bill, which will change our Country forever," Trump said.

• Trump has fiercely criticized McConnell for weeks after the minority leader cut a deal with Senate Democrats in October to raise the federal debt limit.

• His latest barb comes as McConnell and Senate Majority Leader Charles Schumer (D-N.Y.) hold discussions over another deal to avert a default by the end of the month.

Sylvan breaks it down here.

Good to Know

President Biden is reportedly considering nominating former Consumer Financial Protection Bureau (CFPB) Director Richard Cordray as the Federal Reserve's top regulator.

Here's what else have our eye on:

• A pair of rulings by separate federal judges Tuesday temporarily halted parts of the Biden administration's mandatory COVID-19 vaccine policy for certain workers.

A coalition of labor groups released a report calling on federal officials to investigate Amazon over allegedly underreporting cases of COVID-19 at its warehouses.

That's it for today. Thanks for reading and check out The Hill's Finance page for the latest news and coverage. We'll see you tomorrow.