Powell Successfully Walks the Tightrope

Below we highlight a few takeaways from Fed Chair Jerome Powell’s confirmation hearing today before the Senate Banking Committee, broken down by topic.

-Focus on “less accommodative” moves

  • -Powell made numerous statements indicating that COVID, though prevalent, will not be as pressing in policy decisions for the Fed going forward.
  • -Instead, focus seemed to shift toward managing inflation regardless of COVID.
  • -Powell wants to battle future outbreaks economically rather than becoming wrapped up in current issues.

-In a downturn/recession

  • -Obviously the first move would be to lower interest rates, but Powell stressed how the Fed has very little wiggle room right now in this area.
  • -Powell did not present inherent resistance to the concept of asset purchases.

-Wage increases

  • -Powell is skeptical of wage increases.
  • -While wage increases are generally a good thing, his opinion is increases also could cause persistent inflation.
  • -Powell’s demeanor and language on this topic appeared to demonstrate a willingness to raise rates regardless of the effect on wages.