Jerome Powell, Professional Fall Guy

Jerome Powell, Professional Fall Guy

It wasn't so long ago when Jerome Powell readily expressed confidence in the Fed's capacity to engineer the fabled "soft landing." Whether or not he believed his own narrative is another matter, but in public, at least, he implicitly assigned relatively high odds to a benign conjuncture wherein rates could rise enough to combat inflation without too much in the way of collateral damage for the broader economy. Not everyone was buying it. History isn't exactly replete with examples of soft land
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4 thoughts on “Jerome Powell, Professional Fall Guy

  1. Did anyone else notice this from Bloomberg this morning? If it continues, the Fed will have to exclusively cite suppressing wages as the main reason for their actions. That’s a harder sell to the general public.

    “The hot commodities rally is cooling off fast as recession fears gain ground and cloud the outlook for demand.

    Bloomberg’s gauge of spot raw materials has given up about half of its surge since the war.

    Agriculture has been a big drag, with wheat slumping below $10 a bushel to the lowest since April. With harvests kicking off in key countries, many analysts have been boosting production estimates.

    Copper and tin are also taking a bruising, even as strike action and plant work risk supply outages.

    Not to mention energy. US natural gas futures are being dragged lower by a mega LNG disruption. Oil is seeing volatility as traders mull fundamentals, economic angst and policy efforts..”

  2. Most mainstream analysts are underestimating how fast things have been changing since 2019 and how much more leveraged the US and most developed economies are. As a result, monetary tightening is rippling through the system far faster and far more extensively than usual. Just look at mortgage rates +300 bps- Fed funds are only up 150. Credit spreads for junkier corporate bonds are also +200+ in yield. These are the rates that many economic actors actually borrow at…… The FOMC likely has a couple of bullets left in the holster- that is it.

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