Jerome Powell: Prepare for 'Some Pain,' as Fed Tries to Bring Down Inflation
Jerome Powell: Prepare for 'Some Pain,' as Fed Tries to Bring Down Inflation
Fed Head was wrong on inflation for months
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Jerome Powell, the Federal Reserve chairman, sent the Dow tumbling 512 points as of 11:31 a.m. ET on Friday after indicating during a speech in Jackson Hole that the central bank will keep raising interest rates to bring down inflation.
“Restoring price stability will likely require maintaining a restrictive policy stance for some time,” he said. “The historical record cautions strongly against prematurely loosening policy.”
He said there are the “unfortunate costs of reducing inflation.”
He warned that households and businesses will feel “some pain,” but failure to act to “restore price stability would mean far greater pain.”
PAST MISTAKES (Jackson Hole, 2021): Over the 12 months through July, measures of headline and core personal consumption expenditures inflation have run at 4.2 percent and 3.6 percent, respectively—well above our 2 percent longer-run objective.7 Businesses and consumers widely report upward pressure on prices and wages. Inflation at these levels is, of course, a cause for concern. But that concern is tempered by a number of factors that suggest that these elevated readings are likely to prove temporary. This assessment is a critical and ongoing one, and we are carefully monitoring incoming data.
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He continued, “Longer-term inflation expectations have moved much less than actual inflation or near-term expectations, suggesting that households, businesses, and market participants also believe that current high inflation readings are likely to prove transitory and that, in any case, the Fed will keep inflation close to our 2 percent objective over time.”
As Trends Journal subscribers are aware, we warned at the time that inflation was out of control. Powell waited until November 2021 to “retire” the terms “temporary” and “transitory” and admit that the bank should have raised rates earlier, as we reported in “The Powell Push: For Better or Worse” (7 Dec 2021). Inflation will remain high because the game is rigged, and banksters love cheap money and an artificially propped-up stock market so they can buy everything.
Celente said interest rates are far too low in the U.S. to bring down inflation.
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A day before the speech, Goldman Sachs economists said in a letter to clients that they believe Powell will “reiterate the case for slowing the pace of tightening laid out in his July press conference and the July minutes released last week,” The Wall Street Journal reported. They said he will most likely “balance that message by stressing that the FOMC remains committed to bringing inflation down and that upcoming policy decisions will depend on incoming data.”
James Bullard, president of the Federal Reserve Bank of St. Louis, said he would favor another three-quarter-point hike in September.
Besides Powell’s speech, traders welcomed the personal consumption expenditures price index coming in down from 6.8 percent in June to 6.3 percent in July. CNBC noted that the index actually fell 0.1% month over month.
In June, the index hit its highest yearly gain in four decades when it rose 6.8 percent. The Fed’s decisions on future rate hikes often weigh heavily on these numbers because they are considered an inflation gauge since they measure changes in the prices of various goods and services purchased by Americans.
TREND FORECAST: In “ECB Economist Does a 180 on Inflation” (22 Feb 2022), we diagnosed Powell’s condition as “Central Bankster Syndrome,” marked by the compulsion to see soaring prices as “temporary” or “transitory” until long after inflation has rampaged through the economy unchecked.
At his December 2020 press conference, Powell pointed to “disinflationary pressures around the globe” and said “it’s not going to be easy to have inflation move up.”
A month later, with inflation on the move well above the Fed’s 2-percent target rate, Powell said it was only “temporary.”
In July, with inflation running at 5 percent, Powell told a Congressional committee that “we really do believe that these things will come down of their own accord as the economy reopens,” he noted.
Treasury secretary Janet Yellin echoed his mistaken view in a 24 October CNN interview, describing high inflation as “temporary” (“Powell, Yellin Agree: Higher Inflation Ahead,” 26 Oct 2021).
While Powell was waiting for inflation to give up and go away, we documented its relentless rise in “Inflation Tsunami Approaching” (4 May 2021), “Inflation Soon to Get Much Worse” (18 May 2021), “Fed Officials Send Mixed Signals on Policy Shift” (29 Jun 2021), “When Will Fed End Cheap Money Policy?” (27 Jul 2021) and in many of our “Market Overview” sections.
Central banks have no good choices. Their only hope of preventing a global recession is if a huge and unexpected event happens soon, such as peace in Ukraine.