Monday, April 12, 2021

Fed Chairman Jay Powell Shrugs About Developing Price Inflation

Federal Reserve chairman Jay Powell was interviewed by "60 Minutes" correspondent Scott Pelley this past Wednesday. The interview was released on the airwaves Sunday evening on CBS.

Remarkably, Powell continues to show little concern about the price inflation that is developing.

From the interview  (my highlights throughout):

JEROME POWELL: [W]e can afford to wait to see actual inflation appear before we raise interest rates. Now, we don't want inflation to go up materially above 2% and go back to, you know, the bad, old inflation days that we had when you and I were in college back a long time ago. But at the same time, we do have the ability to wait to see real inflation. And that's what we plan on doing...

[W]e want to see inflation move up to 2%. And we mean that on a sustainable basis. We don't mean just tap the base once. But then we'd also like to see it on track to move moderately above 2% for some time. And the reason for that is we want inflation to average 2% over time. Inflation has been below 2%. We want it to be just moderately above 2%. So that's what we're looking for. That's the situation we're looking for. And when we get that, that's when we'll raise interest rates.

So when does Powell think the Fed will start raising rates? Pelley asked him:

SCOTT PELLEY: Near zero interest rates are with us for how long?

JEROME POWELL: Well we've said that we would look at raising interest rates when the labor market recovery is just about complete, when inflation is at 2% and on track to run moderately above 2% for some time. That's what we've said. I don't have a particular calendar date for that. But we would consider raising rates at that time.

SCOTT PELLEY: So all the way through the end of this year, you wouldn't see rates increasing?

JEROME POWELL: I think it's highly unlikely we would raise rates anything like this year, no.

No rate hikes this year! Powell has no idea the price inflation freight train that is coming down the road.

He wouldn't even commit to rate hikes in 2022:

JEROME POWELL: I think it's highly unlikely we would raise rates anything like this year, no.


JEROME POWELL: You know, I don't want to put a date on it. It really comes down to outcome-based guidance is what we call it. And it will not depend on the calendar. 

He just absolutely has no concern about current developing inflation or really any other economic factors.  

SCOTT PELLEY: Is there anything in the economy that's flashing red? 

JEROME POWELL: Flashing red? I really don't think so, no. I think there are always risks. I mentioned the risk of the spread of COVID. We're seeing more COVID cases again. Many parts of the country, as you know, are reopening with enthusiasm. And time is going to tell whether that was premature. But we do see cases moving up again. Not at a high level, but you wouldn't want to see them moving back up. You'd want to see them flat or continuing to decline. They're at much lower levels than they were in the winter. Vaccination is helping, but that's I think the main risk to the speed of the recovery.

Rather than being a conservative steward of the U.S. dollar, Powell is like the drunk who wants to take one more drink before hitting the road. He sees no danger ahead only because he doesn't seem capable of clearly seeing ahead at all.

Current Fed policy is one of the most reckless in the entire history of the Fed and there is not one member of the monetary policy-setting committee, the FOMC, raising any kind of significant concerns.

The Fed is going to be so slow reacting to the developing price inflation that the great danger is it could get way out of hand. 

Buckle your seat belts and hug your gold coins.



  1. It's simple, really. Just look at the world's greatest debtor. How would raising rates affect that debtor? Answers itself.

    1. And a depreciating Dollar also assists that debtor (at the expense of creditors, of course).