US Fed Chair Jerome Powell’s infestation markets are lost in markets, says Jonathan Levin

Speaking at the Senate Committee in 1987, Alan Geinsop, president of the then Federal Reserve, said, “If I find you clearly, you may have realized what I said.” I wonder if the current fed chair Jerome Powell is thinking the same thing.

In a widely expected speech at the Central Bank’s annual solitude at Jackson Hall in Vyoming on Friday, Powell said the economic outlook could “give” a central bank’s trend on monetary policy. Comments sent that as the stock and bond markets rise, traders commented that the policies would definitely reduce interest rates when they met them in mid -September.

The S&P 500 index was ready for its biggest benefit, while the benchmark U.S. The yields on the treasuries were disturbed, and predicted low borrowing costs throughout the economy.

There was some nuisance of a lost speech in response to the celebration of knee shock that was fundamental about trying to balance the double risks of both the labor market and the inflation. Then there is an awkwardness that if the Fed reduces the rate, it can be because the economy is in trouble and it may not be due to inflation.

Indeed, Powell acknowledged that policy makers face difficult work under their dual command to promote maximum employment and stable prices. Although the unemployment rate is low, the data of the labor market has begun to sink, though the report is slightly higher than the 2% target of inflation Fed. Here’s how Powell put it on (load mine):

When our goals are in stress like this, our framework tells us to adjust both sides of our dual mandate. Our policy rate is now 100 basis points near the neutral compared to a year ago, and the stability of the unemployment rate and other labor market measures allows us to continue carefully as we consider a change in our policy trend. Nevertheless, with a policy in the restricted region, the migration balance of baseline views and risks can adjust our policy attitude.

For a good step, Powell added, “The monetary policy is not on the preset course.”

When one of its two goals goes out wildly out of the variables (for example, it was accompanied by 9.1% inflation in 2022), creating a consensus for a policy action for the Central Bank can be relatively easy. But in recent months, economists and policies have begun to disagree about the economy that is mostly nice based on backward -looking data, but in some ways uncomfortable. In that regard, rates from July to 25.95%. The decision to keep the% x increased by the Fed Governors, two dismissed, which has happened for the first time since 1992.

Add to confusion is that the immigration policies are now controlling the supply of labor, that is, it is difficult to know exactly what level of payroll growth is needed to prevent unemployment rate from excessive. “Overall, when the labor market seems to be balanced, it is a strange type of balance that is the result of a significant slowdown in both the supply and demand of the workers,” Powell said on Friday. “This unusual situation indicates that the risks of employment loss are on the rise. And if those risks are met, they can do so quickly in the form of severe high -rise and rising unemployment.”

In other words, the main reason for the Fed cut is that policy makers are concerned about economic deterioration. Powell also noted that GDP growth in the first half of the year is half of the pace of 2024, which is run as part of a downturn in consumer costs – stocks are not the same as the sustainable bull market.

Then there are risks of inflation. Many economists are concerned that President Donald Trump’s tariffs carry a price on goods in the coming months and quarters. The impact has been somewhat humble so far, as companies worked through pre-existing inventories and some of them accepted the margin of narrow profits on the sale of imported goods. But for big-ticket products, such as new cars, the interior of the industry still expects that the price of the year is expected to rise when the model comes to market 2026 lines.

Is it an argument for a tight monetary policy itself is a source of intense debate: Pigeons say that policies should look at “one-” F “price level changes and allow them to be pale with their own data, while Hawks are worried that the tariff has been hitting a time when the nation has already been elevated for five years. Expectations are self-sufficient prophecy, and it will be more difficult to keep a society accustomed to inflation as a normal part of life.

Powell used to put himself in a look-through camp on tariff-powered price effects. And on the margin, it may be a more sensitive reason for reading his speech as he is a “deaf” bias. But he accepted these concerns and declared that “we cannot allow the stability of inflation expectations.”

The vision of speech can help Powell in some ways. In addition to their policy challenges, Powell has simultaneously pushed Trump’s demands for significant low rates. Trump is now threatening to put Fed Governoral Cook a fire due to a potential mortgage fraud, which seems to be organizing a White House pressure campaign to get a further impact in the central bank’s rate-setting committee. In any world, Powell’s speech did not show any signs of placing Trump in the cave, which the famous stock market considers the stock market as presidential score card.

It may be good that the market is over -interpreting the gentle tilt of the speech, or it may be that investors were located in something more S Facides on the belief that the tone will go more hawkish direction. The reality was a lot more hymrum but was perfectly suited for the occasion. Given the data we have, the Fed is set to reduce the rate with the next month and will resume the process of feeling around the right level rates to support sustainable growth with low inflation. But the point of view remains very uncertain, and the process of simplifying policy can move more slowly than expected markets.