High Earners Are Making the Fed’s Job More Difficult
In a rare occurrence, households with the most purchasing power are more pessimistic than those with the least.
Fed Chairman Jerome Powell grapples with a rare occurrence in consumer sentiment.
Photographer: Chip Somodevilla/Getty Images North AmericaIf data dependency is the name of the game, then Federal Reserve Chairman Jerome Powell has his work cut out for him. In an economy driven by consumption, the key is having a firm grasp on how spending is poised to perform in the future. The effects of monetary policy play out with a lag of around one year, which suggests any emerging weakness could be exacerbated by the tightening that’s already taken place.
The challenge posed to policy makers in the current environment is the deafening noise in the data. By some measures, spending trends are at multi-year highs. Forward-looking indicators and anecdotal evidence, however, suggest a hard stop is in the offing.