Powell’s Progress
Jerome Powell spoke today from our nation’s capital and indicated what we all know to be true: The Fed has no business cutting rates at this time.
“The recent data have clearly not given us greater confidence and instead indicate that it is likely to take longer than expected to achieve that confidence,” the Fed Chair said on a moderated panel at Washington’s Wilson Center.
He might be understating it here, but overall he’s in the ballpark.
He went on to say there has been “a lack of further progress so far this year on returning to our two percent inflation goal.”
Federal Reserve Chairman Jerome Powell speaks at the Wilson Center in Washington, DC, on April 16, 2024. (Samuel Corum/Bloomberg via Getty Images)
Now hold on. “Lack of further progress”? Last week’s inflation data suggested that Bidenflation is not just stagnant; it’s actually resurgent. This particular turn of phrase is like declaring that there has been a “lack of forward progress on my fitness goals” just after I ate an entire birthday cake.
One person who understands this phenomenon is Black Rock’s Larry Fink, who said on Friday that the Fed’s two percent inflation target is way out of reach and that massive spending projects are largely to blame.
“We have restructured how we frame our economic policy. We have a trillion dollars of fiscal stimulus in the CHIPS Act, the infrastructure act, and the [Inflation Reduction Act]. We have very poor legal immigration policies that have restricted, and that is all inflationary in jobs,” the WEF board member stated.
It’s hard to ascertain how comfortable Fink is with inflation or all those massive spending programs, but he certainly isn’t denying they are what is driving inflation.
(If you are keeping score at home, it is Joe Biden and the Democrats who are to blame for all of it.)
“As Long as Needed”
Back to Powell on Tuesday. “If higher inflation does persist,” he said, “we can maintain the current level of [interest rates] for as long as needed.”
“As long as needed.”
That is quite declarative.
Powell has gotten gradually more hawkish on future cuts in recent weeks. Fed officials had forecast three quarter-point reductions this year; others on Wall Street believed we could see as many as six cuts in 2024. Powell himself has indicated that the Fed was “not far” from taking action as recently as early last month.
Yet, here we are today.
Clearly, he has seen the light, or, more likely the data, which shows increasing inflation and other macroeconomic numbers that indicate a politically neutral Fed has no business cutting rates now, and is probably looking at mid to late summer as the first possible opportunity to do so.
Being that this is the Breitbart Business Digest, we will state the obvious that all elements of the political and bureaucratic establishment in Washington would prefer to see Joe Biden beat Donald Trump in the November elections, and it will be easier for Joe to win if rates come down. So, look for politicians and media talking heads to try to devise some rationale to try to get the Fed slashing.
It will be interesting to see what talking points they latch onto, considering that evidence that cuts are the right move, right now, is nonexistent.