Fed Chair says inflation fight will be "bumpy"

Fed Chair Jerome Powell is speaking today. (It will play on YouTube.)

Buckle your seat belts.

Fed’s Jerome Powell Says Hiring Surge Shows Why Inflation Fight Could Be Difficult

Central bank officials have been looking for a growth slowdown to gain confidence inflation will keep falling

By Nick Timiraos, The Wall Street Journal, Updated Feb. 7, 2023

Federal Reserve Chair Jerome Powell said the labor market’s surprising strength underscores why the central bank thinks it will face a longer battle to bring inflation down than many investors have been anticipating.

A Labor Department report Friday that showed hiring accelerated in January was “certainly strong—stronger than anyone I know expected,” Mr. Powell said on Tuesday during a moderated discussion before the Economic Club of Washington. “It kind of shows you why we think this will be a process that takes a significant period of time.”…

The process of bringing inflation down to the Fed’s goal of 2% over time “is likely to take quite a bit of time. It’s not going to be, we don’t think, smooth. It’s probably going to be bumpy,” said Mr. Powell on Tuesday. “So we think we’re going to have to do further [rate] increases, and we think we’ll have to hold policy at a restrictive level for some time.”

The department not only reported unusually large job growth in January but — more important for the Fed — it revised previous months’ reported gains higher, suggesting the economy had entered the new year with more momentum than previously thought. Potential glimmers of softening in previous reports, such as a decline in temporary hiring or a drop in hours worked, reversed in January or were revised away…[end quote]

Notice the word “hold.” This is not a pleasant word for investors who expect the Fed to cut the fed funds rate soon after completing a raising program as they have for the past 20 years.

I read previous Fed Chair Ben Bernanke’s book, " 21st Century Monetary Policy: The Federal Reserve from the Great Inflation to COVID-19." After Paul Volcker crushed inflation (along with the economy and the stock and bond markets) by raising the fed funds rate to about 20%, inflation cooled until the Covid fiscal and monetary stimulus. The Fed carefully adjusted the fed funds rate frequently. They raised it proactively if inflation seemed to be picking up. They quickly dropped it at the first whiff of recession.

The markets have become accustomed to the Fed quickly dropping the fed funds rate.

If Powell holds the fed funds rate at a restrictive level for some time – more than a few months – as he has repeated numerous times the market will be blindsided. They simply don’t believe him.

The Fed is focused more on the labor market than goods inflation. The upward revisions by the Labor Department, released last week, coupled with their startling “adjusted” high employment level, produced a strong reaction from the Fed.

The Fed may raise the Fed funds rate more than twice more in 2023. And they won’t cut in 2023 unless there is a financial crisis. A normal recession won’t surprise them and they won’t cut.



Solve a problem create millions or trillions of other problems. Meaning that recipe led to slow GDP growth and $31 tr in federal debt.

Fiscal policy was mostly excluded in that recipe. Fiscal policy is needed for faster GDP growth and pays for itself.

We heard instead that with meager investments and major tax cuts the economy would grow the GDP quickly “paying for itself”. Total and absolute lie. Never happened. The lie never seems to end. Cutting taxes does not increase economic output. If you do not know that is a lie you have never known the truth of our economics.

Monetary policy is no substitute for fiscal policy.

What Volcker did has nothing to do with any of this. That time period was a transition to supply side economics. Capital formation. There is plenty of capital in this economy currently.

The future has the answers, if we build this nation again.

@Leap1 - WOW!

Are you planning on running for office?

→ Leap for Prez in 2024? :rofl:

I am very political. I am very outspoken. The outspoken part knows not to never run.

I serve a different purpose in politics. I serve the economics for this country. That is not political. But it certain can be. The discussion of econ moved forward matters to me.

You did note Sarah never discussed the economics of this country last night. Silence is cheating or better put ripping us off but not telling us. This hurts the wealthy just as much as the poor.

Maybe she should have.




Yeah the unemployment money went away. The group who is most dissatisfied in that article were paid not to work. Irony.


Just 35% of U.S. adults say they’re financially better off now than they were a year ago, according to a newly released Gallup poll. That’s the worst assessment since 2014 — and comes a year after an all-time high of 59% expressed optimism about their finances in early 2020. The biggest drops in this measure year over year were among the 18-to-34 cohort and Republicans, though all groups’ assessments soured from last year.


I pointed this out last summer, that the Fed was only interested in slowing the robust labor market. You replied to me that the Fed is only interested on a 2% inflation rate. I disagreed. The Federal Reserve has always focused on the labor market when it comes to inflation.

The current inflation rate is more about War and Russia’s tight energy supply to the West, China and Covid lock-downs that have slowed manufacturing, and most obvious domestic inflation is being driven by profits, not wages.

Profits have grown faster than labor costs for seven of the past eight quarters. As Paul Donovan, chief economist for UBS’s Global Wealth Management, wrote last week, “today’s price inflation is more a product of profits than wages.”

Look at corporate profit gains vs unit labor costs for 2021/2022. Meanwhile, the Federal Reserve is focused on stemming inflation by knocking the legs out of the labor market, when wages in the current economic season has very little to do with the cause of inflation.