Fed Chairman Jerome Powell has pivoted sharply on inflation, transforming into a policy hawk in the months since he conceded that rising prices had proven to be more powerful and persistent than initially expected.
Danielle DiMartino Booth and Joseph Lavorgna react to the Fed chair's recent comments on 'Making Money.'stuck to a mantra that surging inflation was transitory and likely to fade as supply bottlenecks dissipated.
By comparison, one year ago, when inflation was just starting to rise above the Fed's 2% objective, policymakers projected that they would not raise interest rates until at least 2024. But the root cause of inflation was multipronged, with higher prices stemming from supply chain disruptions, high consumer demand, the Russian war in Ukraine and trillions in government spending that went directly into the pockets of Americans. When inflation did not fall along with virus cases – and once wages began rapidly rising – the Fed was forced to switch course.
Now, Fed policymakers are counting on finding that elusive sweet spot between curbing inflation and preserving economic growth, even though history shows that the U.S. central bank often struggles to successfully thread the needle between those frequently contrasting goals. In this Jan. 29, 2020 file photo, Federal Reserve Chair Jerome Powell pauses during a news conference in Washington.