Did you watch Jerome Powell’s 60 Minutes interview? If not, don’t fret: It was only worth watching if you weren’t otherwise apprised of developments at the Eccles building.
60 Minutes interviews are designed to reach a wider audience than, say, an address to The Economic Club of New York or a post-FOMC meeting press conference. Powell said precisely nothing new during his lengthy sit down with Scott Pelley. Still, I felt compelled to offer a short review on Monday, lest I should be judged somehow derelict.
The Fed’s “making good progress” on inflation, but “the job is not done,” Powell said. The Fed’s confidence is rising that inflation will return sustainably to target, but they want to see more evidence (more good data) before they cut rates. The last thing the Fed wants to do is cut rates prematurely and risk inflation settling above target. Considering the still-resilient labor market, “the prudent thing to do is to just give it some time.”
At one point, Pelley said, flatly, “You disappointed a lot of people on Wednesday,” referring to Powell’s January 31 press conference. I wouldn’t go that far. As BofA’s Michael Hartnett put it last week, markets don’t so much care whether the Fed starts cutting in March or May.
Responding to Pelley, Powell said it’s impossible to overstate how important it is that inflation recedes such that people don’t notice it. Inflation, he said, should be low enough and predictable enough that “people don’t have to think about it in their daily lives.”
There are some dark (and tired) jokes. Inflation for healthcare, higher education and other things people need has been sky-high for decades. But this isn’t the place to litigate that. And in the Fed’s defense, monetary policy can’t correct for the kinds of perverse incentives that pushed up college tuition, nor can the Fed be expected to fix America’s notoriously (tragically) broken healthcare system.
Asked by Pelley about the arbitrary nature of the 2% inflation target — and make no mistake, it is arbitrary — Powell offered a forthright, if not entirely satisfying, explanation.
“Why isn’t it zero, I guess, is the question,” he said, not wanting to skirt the issue. “2% is if interest rates always include an estimate of future inflation. If that estimate is 2%, that means you’ll have 2% more that you can cut rates — the central bank will have more ammunition, more power to fight a downturn if rates are a little bit higher.”
He called that “a pretty stable equilibrium,” which is true when it works. The problem in the 2020s is that we now know how quickly events can conspire to throw that equilibrium out of balance. As Powell will readily concede, it’s by no means clear that monetary policy was the main driver of the disinflation impulse once price growth started to recede. Indeed, he went out of his way last week (as he usually does) to give credit to supply-side factors, and although he called disinflation a “joint story,” it’s obvious that Powell, at least, believes supply-side normalization had more to do with inflation falling than rate hikes.
Asked if the Fed’s going to wait until inflation actually hits 2% and stabilizes there before they cut rates, Powell of course said no. In fact, he said it three times. “No, no. That’s not what we say at all, no,” he told Pelley. “We’re actively considering now going forward cutting rates, and on a 12-month basis inflation, as you know, is not at 2%,” he went on. “But it’s moving down in a way that gives us some comfort.”
Pelley asked Powell specifically about market pricing for a cut at next month’s meeting. Powell, who recorded the interview the day after the FOMC decision, repeated his remarks from the press conference almost verbatim. “I would say, and I did say yesterday, that I think it’s not likely,” he reiterated, before reminding any traders who might’ve been watching on a Sunday evening that the March meeting “is in seven weeks.”
In another life, I was an ardent Fed critic. No one knows the derisive Fed punchlines better than me, or if anyone does, they aren’t as adept with a digital pen, which means even if you’ve been performing the shtick longer than I have, you couldn’t deliver it as effectively if that’s what I’d chosen to write for the rest of my days.
But I found that sort of thing exhausting so, in my second act, I endeavored a more honest approach to covering the Fed. And if I’m being honest, Powell seems like a decent enough guy. As far as wealthy lawyers and former investment bankers go, he’s earnest as hell vis-à-vis everyday people. (A low bar, admittedly.)
That earnestness was on display in Powell’s answer to Pelley’s question about higher prices and whether Main Street might benefit from outright deflation.
“Inflation is one thing, prices are another. I wonder if there’s any reason to believe that people will see the prices of things decline?” Pelley wondered.
“We don’t expect to see a decline in the overall price level. That doesn’t tend to happen in economies, except in very negative circumstances,” Powell said. “If you think about the basic necessities… prices are substantially higher than they were before the pandemic,” he went on. “And so, that’s a big reason why people have been relatively dissatisfied with what is otherwise a pretty good economy.”
When Pelley told Powell that a lot of Americans watching the interview would be unconvinced by Powell’s assurances that the Fed’s decision calculus in 2024 doesn’t include a political motive, Powell said this: “You know, integrity is priceless. And in the end, that’s all you have. We plan on keeping ours.”
“Integrity” says the fed with the recent trading scandal
I think “scandal” vastly overstates the gravity of the “allegations” you’re referring to. Also, that’s just the sort of cheap punchline I go out of my way to eschew because it’s unimaginative and generally elicits eye-rolls.
Let me put it this way: If you think those trades constitute a “scandal,” then my God: I hope you never get a look inside a big bank.
Alternatively, if you’ve ever worked inside a big bank, then you know those Fed trades aren’t a proper “scandal” and you’re just being abrasive for the sake of it. Which is fine. As noted in the article, I made a career of being abrasive for the sake of it in another life.
But when you’ve got actual, real scandals going on all day, every day, at every bank, and when the American public’s treated every week to allegations like those made against George Santos and Bob Menendez, I think it’s fair to say that a guy like Jerome Powell is ok. Until proven otherwise.
Sorry, but if it came out tomorrow that Loretta Mester bought $30,000 worth of SPY ahead of a Fed rate cut, I wouldn’t be bothered by it. Not at all. Not with everything I’ve seen and certainly not in the context of the myriad grave injustices foisted upon innocents all around the world. If you’re sitting at a stoplight at 2 AM on a completely empty road, and it stays red for longer than, say, 90 seconds, would you run it? Probably. And if you did, you’d be in breach of the social contract. Was anyone harmed? No.
Multiple million dollar trades by voting members of the Federal Reserve, but they’re not as bad as banks….how reassuring.
Its OK though, the Fed is investigating it themselves. I’m going to go run a red light to get even with the system!
Ridiculous. Spoiler alert: Every time you step outside your door, somebody’s trying to get one up on you. And whether you realize it or not, you’re doing the same thing to other people. That’s life. The sooner you accept it, the easier you’ll sleep (counterintuitively).
No reasonable person will consider you “derelict” in your “second act.”
Powell is a good guy w/ an even higher bar. That’s probably why it’s tough for him to hide the emotional pain he’s experienced as Fed Chair.
I wondered why the Biden folks pushed him to go on TV–obviously Powell didn’t come up w/ the idea. You captured the sound bite Biden’s handlers wanted Powell to deliver. Still unconvinced it was wise to push Powell onto 60 minutes.
Sounds like a conspiracy theory to me….
The Federal Reserve being told what to do??!
Anyone with a halfway decent BS detector can see that Powell is an earnest person trying to do a good job in an extraordinarily difficult job. Which makes the Trump phenomenon all that more bizarre.
Powell is a good guy, with a relatively (at least) high level of integrity, doing pretty well at a very difficult job. Probably why he wouldn’t be reappointed by a certain candidate (about whom little of the same can be said)…
Probably? There’s a 0.000% chance Trump would renominate Powell. There’s a > 0% chance Trump would fire Powell. Finally, I suspect there’s a 0% (rounded) chance that Powell would accept a third term at the job in a Trump administration were it somehow offered. Frankly, I have to imagine he’s unlikely to be too enamored of the idea of a third term regardless of who sits in the oval office.
His term ends May 2026, I think. I imagine his most earnest wish is to have solidly planted inflation back at 2% without a recession, then retire and join the Central Banker pantheon, which he’ll deserve if that is what transpires.
I think Powell is your classic old school public servant, and that is meant in an approving sense.
I missed the interveiw, was watching the Grammy Awards. The Federal Funds Rate won an award for a song called “Then I Got High.” Even Jay-Z seemed to approve.
I agree, this is a thankless task and J Powell has done his best; inflation from pandemic supply chain disruptions and a profligate government was and is a difficult problem to solve.
Without belaboring this, our times at a certain small investment bank overlapped a bit. The culture was very interesting, and I look back with a lot of gratitude. Jay Powell is a throwback to a pretty good era for Wall Street partnerships. I was surprised Trump appointed him- they could not be more incompatible..Put simply, Jay Powell is decent and competent. Trump is a scumbag. Our politics are toxic, so I am sorry to go there, but this needs to be said.