Jerome Powell, Inflation Fighter?

Jerome Powell is the current chair of the Federal Reserve Bank. He was appointed by President Trump in November 2018 and replaced Janet Yellen who served for 8 years straight as head of that institution. Experts say Jerome Powell will be a great president because he wants to make sure inflation doesn’t get too high, which would hurt economic growth.

Jerome Powell, the head of the Federal Reserve, has been in charge since February 2014. He is a Republican who was appointed by President Trump and he has been fighting inflation since his time at Goldman Sachs. Read more in detail here: head of federal reserve.


On March 16, Federal Reserve Chairman Jerome Powell holds a virtual news conference.

Liu Jie/Zuma Press photo

On Wednesday, the Federal Reserve took the first steps toward controlling the worst inflation in 40 years, and Chairman Jerome Powell sounded almost like a born-again inflation warrior. The Fed’s dilemma, though, is that even 11 forecast interest rate hikes over the next two years would maintain rates substantially below inflation.

During his news conference, Mr. Powell stressed many times, “We have to restore price stability.” His tone was noticeably hawkish, and it seems that he and the rest of the Federal Open Market Committee (FOMC) have been hoodwinked by pricing reality. The central bank’s year-long delusion that inflation would fall swiftly has dissipated.

The Fed’s 25-basis-point hike in the fed funds rate on Wednesday was moderate and anticipated. The unexpected was predicted over the following two years. The consensus forecast of Fed governors and bank presidents in December was for four 25-point rises by the end of the year. There will be another four rate rises in 2023, bringing the total to seven.

The Fed also descended from its perch on when to begin lowering its $9 trillion balance sheet, which it has amassed to alleviate financial conditions. “At a future meeting,” the FOMC said it will begin to cut its Treasury and mortgage-backed securities holdings. This seems to be a case of sooner rather than later. This “quantitative tightening” has been long overdue, and inflation might have been considerably lower if the Fed had begun doing it a year ago.

The Fed’s dilemma is that, as the governors and bank presidents all but concede, it has already allowed inflation run wild. They now expect inflation to reach 4.3 percent this year, up from 2.6 percent just three months earlier. That’s the rate of so-called personal-consumption-expenditure (PCE) inflation, which is lower than the consumer-price index and is the Fed’s favored metric. PCE inflation was just 0.6 percent in January, meaning it can only grow 3.7 percent for the rest of the year to match the Fed’s forecast of 4.3 percent for 2022. Best wishes.

Even with the Fed’s expected 11 25-point rate rises, the fed-funds interest rate by the end of 2023 would be just 2.8 percent. That would still be less than the projected inflation rate, implying negative real rates for the whole years of 2022 and 2023. Inflation does not reduce until interest rates surpass the rate of inflation, according to long-term monetary policy experience. Unless there’s a recession, there’s no reason to believe this time will be different.

Mr. Powell said during his news conference that the US economy is “extremely robust.” However, the Fed’s experts reduced their median prediction for economic growth this year from 4% to 2.8 percent in December. It’s also worth noting that, for the first time in probably two years, the FOMC statement made no mention of the pandemic’s economic concerns. Several times, the Chairman mentioned the situation in Ukraine as a threat to both GDP and inflation.

Every astute Fed Chairman need a “exogenous” explanation for economic issues other than monetary policy. Mr. Powell has easily transitioned from epidemic to war to oil prices. It’s not enough to exonerate the Fed of the inflation disaster it helped create; it must now figure out how to clean it up.

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The print issue of the March 17, 2022, was published.

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