A too-warm welcome for new Fed chief Jerome Powell

Jerome Powell, who was sworn in as chief of America’s Federal Reserve this week, faces a baptism of fire.


2018 Getty Images

Jerome Powell, who was sworn in as chief of America's Federal Reserve this week, faces a baptism of fire. If inflation is returning, he must ensure it doesn't get out of control. Yet keeping the economic upswing going at the same time implies walking a tightrope tightening monetary policy just enough to temper price rises, but not so much that the stockmarket and economy loses confidence and a recession ensues.

Advertisement - Article continues below

In the 1970s, inflation rose too far and it took a recession to subdue it. Powell (pictured left, standing on the right) was appointed by President Donald Trump, who will be "determined to deliver economic growth ahead of November's election", as Fidelity's Tom Stevenson notes in The Daily Telegraph, so some think he may raise rates too slowly to keep growth going and avoid stockmarket jitters. To that end, he may loosen monetary policy if this sell-off turns really nasty.

But that would merely perpetuate our present dysfunction: placating nervous investors at the first sign of turbulence, and thereby blowing up damaging bubble after damaging bubble. Given the Fed's inauspicious track record, investors should hold gold to hedge against both crisis and inflation.




How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019

Why Wall Street has got the US economy wrong again

The hiring slowdown does not signal recession for the US economy. Growth is just moving down a gear, says Brian Pellegrini.
25 Oct 2019
US Economy

Trump urges the US Federal Reserve to bring in negative interest rates

Donald Trump has urged the Federal Reserve to embrace negative interest rates.
21 May 2020

For how long can stockmarkets ignore rising unemployment?

US unemployment figures are looking terrible – up to 20 million people have lost their jobs. But markets don’t seem to care. John Stepek explains what…
11 May 2020

Most Popular

UK Economy

What bounce back loans can tell us about how we’ll pay for all this

The government will guarantee emergency "bounce back loans" for small businesses hit by Covid-19. Inevitably, many businesses will default. And there'…
1 Jun 2020

This looks like the biggest opportunity in today’s markets

With low interest rates and constant money-printing, most assets have become expensive. But one major asset class hasn’t. John Stepek explains why com…
2 Jun 2020

These seven charts show exactly why you must own gold today

Covid-19 is accelerating many trends that were already in existence. The rising gold price is one such trend. These seven charts, says Dominic Frisby,…
3 Jun 2020