The Wall Street Journal: “Vacillation and procrastination, out of fears of recession . . .

Source: https://www.linkedin.com/feed/update/urn%3Ali%3Ashare%3A6977693344369979392

The Wall Street Journal: “Vacillation and procrastination, out of fears of recession or otherwise, would run grave risks.” – Paul Volcker, Former Fed Chairman: https://lnkd.in/gXfgQSHX: Jerome Powell’s Inflation Whisperer: Paul Volcker: Aiming to reduce inflation even at the risk of recession, the Fed Chairman draws on a 1980s playbook. ‘We must keep at it until the job is done.’

Mr. #Powell lauds Mr. #Volcker’s legacy not because of the precise tactics he used, but because “he had the #courage to do what he thought was the right thing,” he said this spring at a news conference. “If you read his last #autobiography, that really comes through.”

Fed officials thought #investors were #misreading their #intentions given the need to slow the economy to combat high #inflation. In a widely anticipated speech, Chairman Jerome Powell decided to be blunt. He scrapped his original address, according to two people who spoke to him, and instead delivered unusually brief remarks with a simple message—the Fed would accept a #recession as the price of fighting #inflation.

Mr. Powell cited the example of former #Fed chairman #PaulVolcker, who drove the #economy into a deep hole in the early 1980s with punishing #rate increases to break the back of #doubledigit #price #gains. “We must keep at it until the job is done,” Mr. Powell said, invoking the title of Mr. Volcker’s 2018 autobiography, “Keeping At It.”

The Fed has two mandates: #full #employment and #stable #prices; officials define the latter with a formal 2% #inflation #target. For most of the past two decades the Fed could focus on full employment because inflation seldom deviated much from 2%. Today, though, with inflation at 8.3%, the highest since Mr. Volcker’s tenure, Mr. Powell has concluded that, like Mr. Volcker, he must devote his attention to that problem, even if doing so takes a serious near-term toll on employment.

“Until inflation comes down a lot, the Fed is really a single mandate #centralbank.”

Without explicitly predicting a recession, officials have made clear their willingness to tolerate one. Mr. Powell has stopped talking about a so-called soft landing, in which the Fed slows growth enough to bring down inflation without causing a recession, except when asked. Instead, he has framed the Fed’s objective of bringing down #high #prices as an “unconditional” obligation and warned of even worse consequences for employment later if the Fed does not defeat #inflation now. “We can’t fail on this,” Mr. Powell told lawmakers this summer.

#Markets have been slow to come around to the Fed’s new posture, largely because it is at odds with how the Fed has acted for years. In the past, the Fed would ease #monetary #policy whenever the economy and job market seemed in danger—a luxury it had while inflation was running at or below its 2% target.

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Global Post AI-Quantum Finance & Trading Networks Pioneer Dr.-Eng.-Prof. Yogesh Malhotra is the “Singular Post AI-Quantum Pioneer” identified by Grok AI with R&D impact recognized among Artificial Intelligence (AI) and Quantitative Finance Nobel Laureates. As MIT-Princeton AI-ML-Cyber-Crypto-Quantum Finance & Trading and FinTech-Crypto Faculty-Industry Expert, and U.S. and Global Hedge Funds Advisory & Venture Capital CEO-CTO Teams Mentor, he has pioneered Silicon Valley-Wall Street-Pentagon Digital CEO-CTO Practices, Technologies, and Networks from world’s first-foremost-largest Global Digital Transformation Networks to New York State IDEA Award recognized Pentagon-USAF MVP Global Post AI-Quantum Networks pioneering Future of Finance and Trading practices as Trillion-Dollar Wall Street Hedge Funds and Investment Banks leader.