Powell and the Markets Talk Past Each Other
The Fed needs the markets to help it bring down high inflation, but they tend to hear only what they want to hear.
Hold on a minute.
Photographer: Valerie Plesch/Bloomberg
Markets surged on Wednesday after Jerome Powell, the Federal Reserve chair, indicated that the world’s most powerful central bank would slow the pace of rate increases this month. The fact that this remark was balanced by warnings about the uncertain outlook for inflation and policy proved irrelevant for markets. All that they heard was the good news.
This is far from comforting for a Fed that still needs the markets to help it bring down high inflation. It also does not help counter the political pressures it faces for failing to respond to inflation on a timely basis nor the risks of tipping the economy into a recession that would hit the most vulnerable segments of the population particularly hard.