Powell in a ‘Delicate Dance’ With Wall Street as Markets Heat Up

Ever since the Federal Reserve began its policy-tightening campaign, Jerome Powell has been happy to ignore one form of inflation: Rising asset prices.

Now as the Fed chair gears up for his congressional testimony on Capitol Hill, Wall Street is starting to wonder just how long Powell’s hands-off approach can last against the backdrop of sizzling markets.

With tech stocks hitting relentless records of late, a Goldman Sachs Group Inc. measure of financial conditions has eased at one of the fastest clips in four decades. Ever-volatile Bitcoin touched new heights at one point Tuesday as the meme-coin crowd roars back to life. On economic growth, even Nouriel “Dr. Doom” Roubini is sounding, well, bullish.

All that has a cohort of market participants on the lookout for signs that the cross-asset rally is making life harder for the Fed chief who’s on a legacy-defining mission to ease monetary policy in the months ahead — without undermining progress on inflation.

“The Fed has to watch financial conditions closely and it is a delicate dance for Powell,” said Priya Misra, portfolio manager at JPMorgan Asset Management. “Too much easing — because the market expects the Fed to cut too aggressively — and then the Fed will push back since they want to make sure that inflation is under control.”

Financial Conditions Continue to Ease