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.

Andrew Van Sickle
By
published
in Features

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(Image credit: 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.

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.

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Andrew Van Sickle
Andrew Van Sickle
Editor, MoneyWeek

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.

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