Federal Reserve Chair Jerome Powell has struggled to get his message across as inflation stays above 8 percent, but now it appears he’s made himself clear to Wall Street
Federal Reserve Chair Jerome Powell has an image problem. It was less than three years ago that he was the guy in the meme making the money printer go brrr. But for the last 18 months or so, his role in American financial life has evolved: For a while, he was the “transient” guy who missed that inflation was happening; and in 2022 he’s been trying to recast himself as the sober economist with steely enough nerves to defeat that same inflation by raising interest rates higher than anyone expected. To date, that latter role has been his most challenging one.
On Wednesday, as expected, the Fed again jacked up the cost of borrowing by 0.75 percent, the fourth straight hike in interest rates this year — a move that makes the cost of just about anything that requires borrowing, from mortgages to credit cards, more expensive. But this hike was also different than the three prior ones – investors were hopeful that Powell would finally start backing off after this, that the worst was over. , At first today, the Fed’s announcement seemed to confirm that optimistic view. But as the afternoon wore on, and Powell took the podium in front of a room full of financial reporters and made it crystal clear that he isn’t done yet playing the tough guy and that he is prepared to continue inflicting his harsh remedies on the economy to fight inflation.
It’s been an objectively difficult time to oversee the world’s largest economy, and no matter how much of a sourpuss he has put on on or how often he talks about bringing “pain” to the American workforce, Powell has had to keep convincing the market – that is, all the investors in the world – that he isn’t about to chicken out on his plan to keep raising rates. Powell knows that, if Wall Street sees him as weak, inflation could surge as investors plow more money into the economy.
