What Keeps Federal Reserve Chairman Jerome Powell Up at Night?

Monster Ztudio / shutterstock.com
Monster Ztudio / shutterstock.com

Federal Reserve Chairman Jerome Powell made some noise in the financial world on Tuesday as he spoke about the economy right next to his former boss, Carlyle Group co-founder David Rubenstein. They both were at the Economic Club of Washington.

Stocks were hung up in the balance as investors tried to get a read on the economic outlook from Powell’s perspective. They tried to get a grip on how Powell felt about inflation and future interest rate hikes.

Wall Street celebrated as the Fed chair said that the disinflationary process has begun, but their cheers were short-lived when he also said that the road to reaching 2% inflation would be “bumpy” and “long” with more rate hikes ahead.

The stock market went high, and then it quickly fell to session lows. It recovered at the close of the day in the green.

“Powell doesn’t want to play games with financial markets,” said EY Parthenon chief economist Gregory Daco. But he also said that Powell wanted to communicate that the Fed’s “base case was not for inflation to come down as quickly and painlessly as some market participants appear to expect.”

Powell believes bringing down prices will be more difficult than investors anticipate. This is due to structural changes in the labor market. There were an astonishing 517,000 jobs added to the U.S. economy in January. The unemployment rate fell to 3.4% which is a level we haven’t seen since May of 1969.

President Biden said Friday he takes no responsibility for the ongoing inflation crisis in the country, as he highlighted a stronger-than-expected January jobs report.

“Remember what the economy was like when I got here? Jobs were hemorrhaging, inflation was rising. We weren’t manufacturing a damn thing here. We were in real economic difficulty. That’s why I don’t,” the president said.