The last time Jerome Powell faced a Senate confirmation hearing, Bob Corker and Ben Sasse were still on the Banking Committee, annual inflation was running right around 2 percent and the jobless rate was only 4 percent. OK, so that last one isn’t much of a stretch. But when Powell appears before the Senate Banking Committee tomorrow for a new term, he’ll have a dramatically different economic backdrop. Four years ago, he was taking the reins from then-Chair Janet Yellen, who had led the Fed through a series of tepid rate increases following the 2008 financial crisis and mapped out a plan for shrinking its $4.5 trillion asset portfolio, a process that kicked off at Yellen’s final meeting as chair. This time, he’s in the driver’s seat as the Fed begins to pull back its extraordinary support for financial markets and prepares to raise interest rates. The obstacles: surging inflation, bewildering employment data, global supply chain snarls and record-high infections from a pandemic that has thrown another speed bump in front of the U.S. economy. And he has a tough message to deliver to lawmakers: The party is ending. From my colleague Victoria Guida — “ For Powell, the way forward is charged with peril: If he slams on the brakes too fast, the economy could falter and even slip into recession, dashing hopes for the Fed's goal of ‘maximum employment.’ Moving too slowly to rein in price spikes risks the danger of even higher inflation. Either scenario could be a nightmare for President Joe Biden's Democrats in an election year. “Powell is widely credited with taking quick and sweeping action to keep the economy afloat during the severe pandemic disruptions, so his confirmation is not in any jeopardy. But heightened frustration among Americans about soaring prices is fueling congressional pressure on the Fed chief — a Republican who was first elevated to the chair by President Donald Trump — over how the Fed will respond.” Inflation vs. maximum employment — On monetary policy, the issues are fairly clear cut. Powell is likely to face questions from all sides on inflation, though the Fed’s sharp pivot toward tighter monetary policy over the past two months will likely assuage some lawmakers worried that the central bank isn’t taking inflation seriously enough. Time will be on Powell’s side: He’ll avoid having to take questions on the latest consumer price data, which won’t come out until Wednesday morning and is likely to show another terrible annual inflation print. Meanwhile, Democrats including Chair Sherrod Brown (D-Ohio) are likely to grill him on his views on maximum employment — specifically how soon the Fed might reach that goal, and how the central bank defines it. Powell at his last press conference left the door open to raising rates even before the labor market mandate is fulfilled; don’t be surprised if Democrats push him for a commitment to hold off. “The policy challenge is far more complicated than in 2018, when Powell faced uncertainty about labor slack but without the added pressure of high inflation,” Adam Ozimek, chief economist at freelancing platform Upwork, told Victoria last week. WWWD: What Will Warren Do? Powell’s trickiest back-and-forth, of course, is likely to come from Elizabeth Warren . The Massachusetts Democrat is the only member of her party to publicly oppose Powell — recall, she went so far as to call him a “dangerous man” at a hearing last year — over the Fed’s moves to ease regulations for financial firms, and the trading scandal that prompted the resignation of two top bank officials in September. At Powell’s last appearance before the committee, on Nov. 30, Warren pressed him about the authority of the Fed’s vice chair for supervision to set regulatory policy, and whether Powell would defer to that person (whom Biden is set to nominate any day now). We also expect Warren and others will take Powell to task over last week’s revelation that Fed Vice Chair Richard Clarida failed to fully disclose financial trades he made at the onset of the pandemic. IT’S MONDAY — What are the odds the White House puts out three new Fed nominees this week, when two of the president’s picks are testifying on the Hill? We think near-zilch. Hey NEC folks, tell us we’re wrong! You can reach us at kdavidson@politico.com, aweaver@politico.com or on Twitter @katedavidson or @aubreeeweaver. | 
