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Jerome Powell’s inflation problem to define second term leading Fed

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Federal Reserve Chair Jerome Powell is facing a much tougher confirmation process than four years ago, forced to explain how inflation reached its highest level in 40 years under his watch. He’s led the central bank since 2018, after then-President Donald Trump nominated him to the position. President Joe Biden renominated him last year, and if confirmed by the Senate, his second 4-year term will begin in February.

Powell ushered the country through one of its darkest moments in history: the onset of the COVID-19 pandemic. Over the course of one month, global markets crashed about 34%. 

The Federal Reserve initiated an historic response, cutting interest rates to near zero while initially buying up $2.3 trillion in bonds to stimulate lending. Powell and the Fed continued asset purchases over the next two years to stabilize the economy.

“We’re trying to get help quickly to the economy as it’s needed and I worry in hindsight we’ll see that we could have done things differently,” Powell said in an April 2020 interview. “But one thing I don’t worry about is inflation right now.”

Powell quickly steered the markets through a dramatic recovery and gained himself a new online reputation as “J-Pow,” becoming a darling among meme investors who credited his easy money policies with helping to keep the markets zooming higher.  

But when consumer prices also kept surging higher and higher, month after month, Powell drew ire from all directions for repeatedly calling inflation levels “transitory.”

The country ended 2021 with inflation reaching 7% over the course of 12 months, the highest it’s been since 1982.

“The characterization of inflation as transitory is probably the worst inflation call in the history of the Federal Reserve,” Allianz Chief Economic Advisor Mohamed El-Erian said in December 2021. 

The Fed Chair finally admitted at a November 2021 Senate Banking Committee hearing that it was time to reconsider his language.

I think it’s time to probably retire that word and tell people more clearly what we mean,” Powell said.

Many criticized Powell for not acting sooner to tackle inflation, instead keeping interest rates low and asset purchases flowing at full speed when the economy showed large strides toward recovery. 

“I’m concerned that the Fed missed the boat on addressing inflation sooner, a lot of us are, and as a result of that the Fed under your leadership has lost a lot of credibility,” Sen. Richard Shelby (R-AL) told Powell during his confirmation hearing with the Senate banking committee January 11. 

A Republican, Powell has also drawn criticism from some on the left. Sen. Elizabeth Warren (D-MA) was the only member of the Senate banking committee to oppose his confirmation in 2018. 

“You have acted to make our banking system less safe and that makes you a dangerous man to head up the Fed, and it’s why I will oppose your renomination,” Warren said in a September 2021 Senate hearing. 

Despite recent challenges pivoting policy following a once-in-a-lifetime pandemic, Powell has broad bipartisan support on Capitol Hill and on Wall Street. Markets reacted favorably when Biden renominated him to be chief of the nation’s monetary policy. 

In 2018, he was confirmed to the post by a vote of 84-13, and he’s widely expected to be confirmed once again for another four years.

SIMONE DEL ROSARIO: HE WAS CREDITED WITH SAVING MARKETS FROM COLLAPSE WHEN COVID HIT.

JEROME POWELL: we acted forcefully to get our markets working again and as a result market conditions have generally improved.

SIMONE DEL ROSARIO: NOW HE’S BEING BLAMED FOR OVERHEATING THE ECONOMY.

NEWS ANCHOR: you do not leave the spigot open like this for this long

SIMONE DEL ROSARIO: AS FEDERAL RESERVE CHAIR – HE’S ONE OF THE MOST INFLUENTIAL ECONOMIC FORCES IN THE COUNTRY. WHICH MAKES JEROME POWELL JUST ONE NAME YOU NEED TO KNOW.

JEROME POWELL: My duty is one that congress has given us which is to use our tools to achieve maximum employment and stable prices and to supervise and regulate banks so that they treat their customers fairly.

SIMONE DEL ROSARIO: AS CHIEF OF THE NATION’S MONETARY POLICY – IT’S A TOUGH GIG ON A GOOD DAY. ON A BAD DAY, HOW POWELL AND THE FED RESPONDED – MADE HISTORY.

NEWS ANCHOR: in a historic unprecedented move the federal reserve announcing at this time programs to pump about 2.3 trillion dollars into the economy.

SIMONE DEL ROSARIO: AFTER CUTTING INTEREST RATES TO NEAR ZERO AND BUYING TRILLIONS IN BONDS TO STIMULATE LENDING, JEROME POWELL GAINED A NEW ONLINE REPUTATION, J-POW.

THE MEMES WENT FOR MILES AS WALL STREET GOT RICH, MORE THAN RECOVERING FROM THE DEPTHS OF THE PANDEMIC.

JEROME POWELL: we’re trying to get help quickly to the economy as it’s needed. one thing i don’t worry about is inflation right now.

SIMONE DEL ROSARIO: NO, THAT WOULD BE LATER. WITH INFLATION IN LATE 2021 REACHING ITS HIGHEST LEVEL IN NEARLY 40 YEARS. 

NEWS ANCHOR: are folks being too hard on jay powell? No, jay powell, he’s on my naughty list.

SIMONE DEL ROSARIO: POWELL DREW IRE FROM ALL DIRECTIONS OVER CALLING PERSISTENT INFLATION LEVELS TRANSITORY.

MOHAMED EL-ERIAN: the characterization of inflation as transitory is probably the worst inflation call in the history of the federal reserve 

THE REPUBLICAN, FIRST TAPPED BY THEN-PRESIDENT DONALD TRUMP TO BE THE 16TH FED CHIEF IN HISTORY – WAS RENOMINATED BY DEMOCRATIC PRESIDENT JOE BIDEN IN 2021. A MOVE SOME ON THE LEFT DENOUNCED.

SENATOR ELIZABETH WARREN: you have acted to make our banking system less safe and that makes you a dangerous man to head up the fed.

SIMONE DEL ROSARIO: HE’S BEEN IN THE RING WITH THE RIGHT TOO, IN A HIGH PROFILE SPARRING WITH TRUMP OVER INTEREST RATES.

FORMER PRESIDENT DONALD TRUMP: do i want him to resign let me put it this way if he did i wouldn’t stop him 

SIMONE DEL ROSARIO: SPOILER ALERT: HE DIDN’T. FROM SENATE TO REDDIT TO WALL STREET, POWELL IS PRETTY WELL LIKED WHERE HE IS. BUT THAT REPUTATION RIDES ON HIS ABILITY TO CURB INFLATION AND HOW THE STOCK MARKET RESPONDS.

WITH ANOTHER FOUR YEAR TERM TO SHAPE THE COUNTRY’S ECONOMY, JEROME POWELL IS JUST ONE NAME YOU NEED TO KNOW.

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Federal Reserve Chair Jerome Powell is facing a much tougher confirmation process than four years ago, forced to explain how inflation reached its highest level in 40 years under his watch. He’s led the central bank since 2018, after then-President Donald Trump nominated him to the position. President Joe Biden renominated him last year, and if confirmed by the Senate, his second 4-year term will begin in February.

Powell ushered the country through one of its darkest moments in history: the onset of the COVID-19 pandemic. Over the course of one month, global markets crashed about 34%. 

The Federal Reserve initiated an historic response, cutting interest rates to near zero while initially buying up $2.3 trillion in bonds to stimulate lending. Powell and the Fed continued asset purchases over the next two years to stabilize the economy.

“We’re trying to get help quickly to the economy as it’s needed and I worry in hindsight we’ll see that we could have done things differently,” Powell said in an April 2020 interview. “But one thing I don’t worry about is inflation right now.”

Powell quickly steered the markets through a dramatic recovery and gained himself a new online reputation as “J-Pow,” becoming a darling among meme investors who credited his easy money policies with helping to keep the markets zooming higher.  

But when consumer prices also kept surging higher and higher, month after month, Powell drew ire from all directions for repeatedly calling inflation levels “transitory.”

The country ended 2021 with inflation reaching 7% over the course of 12 months, the highest it’s been since 1982.

“The characterization of inflation as transitory is probably the worst inflation call in the history of the Federal Reserve,” Allianz Chief Economic Advisor Mohamed El-Erian said in December 2021. 

The Fed Chair finally admitted at a November 2021 Senate Banking Committee hearing that it was time to reconsider his language.

I think it’s time to probably retire that word and tell people more clearly what we mean,” Powell said.

Many criticized Powell for not acting sooner to tackle inflation, instead keeping interest rates low and asset purchases flowing at full speed when the economy showed large strides toward recovery. 

“I’m concerned that the Fed missed the boat on addressing inflation sooner, a lot of us are, and as a result of that the Fed under your leadership has lost a lot of credibility,” Sen. Richard Shelby (R-AL) told Powell during his confirmation hearing with the Senate banking committee January 11. 

A Republican, Powell has also drawn criticism from some on the left. Sen. Elizabeth Warren (D-MA) was the only member of the Senate banking committee to oppose his confirmation in 2018. 

“You have acted to make our banking system less safe and that makes you a dangerous man to head up the Fed, and it’s why I will oppose your renomination,” Warren said in a September 2021 Senate hearing. 

Despite recent challenges pivoting policy following a once-in-a-lifetime pandemic, Powell has broad bipartisan support on Capitol Hill and on Wall Street. Markets reacted favorably when Biden renominated him to be chief of the nation’s monetary policy. 

In 2018, he was confirmed to the post by a vote of 84-13, and he’s widely expected to be confirmed once again for another four years.

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