Breaking News
Close
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Fed Watch: Powell More Pessimistic On Inflation As Senate Confirms Second Term

By Investing.com (Darrell Delamaide/Investing.com)Market OverviewMay 16, 2022 08:31
uk.investing.com/analysis/fed-watch-powell-more-pessimistic-on-inflation-as-senate-confirms-second-term-200518853
Fed Watch: Powell More Pessimistic On Inflation As Senate Confirms Second Term
By Investing.com (Darrell Delamaide/Investing.com)   |  May 16, 2022 08:31
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Four more years. The Senate voted 80-19 last week to confirm Jerome Powell for a second term as chairman of the Federal Reserve last week, in a bipartisan vote that was largely expected.

So, a middling member of the board of governors who became sort of an accidental chairman after then-President Donald Trump misunderstood his intentions on raising interest rates, has now been duly renominated and Senate confirmed to continue listening to Fed economists and following their models.

People give Powell a lot of credit for following the playbook of his predecessor, Ben Bernanke, when faced with the challenge of the COVID-19 pandemic—print money like crazy and hope for the best.

It worked, except we now have runaway inflation, perhaps due to an excessive amount of money creation.

Anyway, the newly confirmed Fed chairman last week said some interesting things in an interview with Marketplace’s Kai Ryssdal. The headline grabber:

“The question whether we can execute a soft landing or not, it may actually depend on factors that we don’t control.”

Interesting because for months Powell has insisted that the Fed has the “tools” to control inflation. Sadly, apparently not enough tools. Perhaps the Fed should have acted sooner?

“If you had perfect hindsight you’d go back and it probably would have been better for us to have raised rates a little sooner.”

Yes, perhaps, instead of labeling inflation as transitory and not acting as every sensible central bank reacts when inflation rears its ugly head.

More:

“The process of getting inflation down to 2% will also include some pain, but ultimately the most painful thing would be if we were to fail to deal with it and inflation were to get entrenched in the economy at high levels.”

Those 19 senators voting against confirmation consisted of Republicans who weren’t happy with Powell’s performance on inflation, but also a sprinkling of progressive Democrats like Elizabeth Warren who objected to him for not doing enough on other things, like bank regulation or climate risk. History will tell us which ones made a good choice.

U.S., European Central Banks Undergo Changing Of The Guard

The Dallas Fed has named the high-powered vice president of the New York Fed, Lorie Logan, to succeed Robert Kaplan as head of the regional bank. Logan most recently has been in charge of managing the Fed’s $9 trillion in assets as manager of the System Open Market Account.

A Fed veteran who has worked with the central bank since 1999, Logan will become a voting member of the Federal Open Market Committee next year when Dallas takes its turn as one of the four regional banks allowed a vote. Voting or not, she will be a strong voice on the policymaking panel.

The Senate has also confirmed Philip Jefferson and Lisa Cook to the Fed board of governors, and the Boston Fed has named Susan M. Collins as its president to succeed Eric Rosengren as the first black woman to head a Fed regional bank as the Fed continues to diversify its leadership.

At the European Central Bank, hawks and doves are lining up on the ECB governing council to decide whether to raise interest rates in July, after it has terminated its asset purchase program.

The council consists of an unwieldy 25 members, as each of the 19 national central bank governors belongs, as well as the six members of the executive board.

Before the euro and the ECB, Germany’s conservative central bank, the Bundesbank, largely determined European monetary policy because other countries in the European Monetary System had to follow Germany’s lead.

Now, the head of the Bundesbank, Joachim Nagel, only gets one vote on the council, the same as the representatives from Cyprus or Malta—and doesn’t even get to vote at every meeting because of the ECB’s rotation system.

Nagel, who took office in January, has become leader of the hawk faction on the council, but the French president of the ECB, Christine Lagarde, lines up with the doves, as does the chief economist, Ireland’s Philip Lane.

Europe is in a different situation than the US, with an economy much more vulnerable to repercussions of the Ukraine war, even though Europe also faces surging inflation.

There is room for debate on the issue, but it is hardly a coincidence that the hawks come fiscally strict from northern Europe and doves come from debt-prone southern Europe.

Fed Watch: Powell More Pessimistic On Inflation As Senate Confirms Second Term
 

Related Articles

Ipek Ozkardeskaya
‘Very Challenging’, Indeed By Ipek Ozkardeskaya - Jun 23, 2022

Market optimism couldn’t survive Jerome Powell’s testimony yesterday, as he said that a recession is possible, and that calling a soft landing is ‘very challenging’ under the...

Fed Watch: Powell More Pessimistic On Inflation As Senate Confirms Second Term

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Shalom Raviv
Shalom Raviv May 16, 2022 11:30
Saved. See Saved Items.
This comment has already been saved in your Saved Items
What does it mean practically?
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Our Apps
DOWNLOAD APPApp store
Investing.com
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
or
Sign up with Email