Jerome Powell prolongs our economic agony

Jerome Powell prolongs the economic crisis by refusing to raise interest rates at the necessary pace. It's time to tear off the bandage.

Can we all agree that the Federal Reserve has a plan to fight runaway inflation? They do. President Jerome Powell practically admitted it. After toning down his comments ahead of previous rate hikes, leaving room for maneuver that gave way to market rallies, Powell left no doubt on this one. It is necessary to wreak havoc on the economy and put downward pressure on labor markets and wage increases to stop the rise of inflation. Whether you buy into that logic or believe, like Elon Musk, that such moves could lead to deflation, it doesn't matter.

All that matters is what those who vote on rate hikes think, and there's plenty of evidence that they won't stop until the rate is above 4%. Wednesday's rate hike of 75 basis points only moves us in that direction. This is the third such 75 basis point adjustment, and we were almost told it wouldn't be the last. Although these rate hikes are historic, they prolong the economic difficulties associated with them. It's time for the Fed to get brutally honest about the state of the economy and its direction.

Jerome Powell said he aimed to give the economy a soft landing. However, he also said, "Our responsibility to ensure price stability is unconditional."

Except the soft landing he would like to achieve is something out of a science fiction novel. This is something that those following the situation do not believe. Former Federal Reserve Bank of New York President William Dudley admitted as much, saying, “They're going to try to avoid the recession. They will try to make a soft landing. The problem is that the leeway to do so is virtually non-existent at this point. »

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