Jan 30, 2019

Jerome Powell's obsession with inflation and economic growth

Illustration: Sarah Grillo/Axios

Federal Reserve chairman Jerome Powell talks about inflation, unemployment and growth more than anything else, an Axios analysis of the chairman's speeches and congressional testimonies in his first year shows.

Why it matters: A new era of more frequent press conferences begins on Wednesday, and it will likely change the way investors look at Powell's words.

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Data: Federal Reserve System and Federal Reserve Bank of St. Louis; Note: Rates calculated using speeches and testimonies given by each chair during their first year in office; Chart: Naema Ahmed and Courtenay Brown/Axios

Powell dropped the word "inflation" much more often than Janet Yellen, Ben Bernanke, Alan Greenspan and Paul Volcker did during their first year at the helm.

  • Powell took over as chairman in an era of low inflation, low unemployment and strong economic growth, in contrast to Volcker who was appointed to fight stagflation and Bernanke who began his chairmanship at the height of the housing boom.
  • Despite the overwhelming influence Powell has had on the stock market, he mentioned "markets" no more than Yellen during her first year, but far less than other predecessors.

The big picture: As the Wall Street Journal's Nick Timiraos points out, there have been a series of confusing comments from Powell that have spooked markets. Both investors and the chairman himself will now have to get used to a bigger and more regular dose of Powell.

  • "We do not envy Chair Powell, who is clearly not a verbal stunt pilot, on how he plans to address the questions he will face from aggressive financial journalists following the release of the Fed statement," says RSM chief economist Joe Brusuelas.
  • Powell's increased face time with reporters "could be a volatility factor," Liz Ann Sonders, chief investment strategist at Charles Schwab tells Axios. Though, she believes the net effect of more press conferences is more positive than negative.

What to watch: Virtually no one expects the Fed to announce an interest rate hike on Wednesday, so the focus will be on the press conference.

  • Without the release of new economic projections, there will be fewer questions surrounding things like the dot plot, so expect "harder/squishier [topics], for good or for bad," says Nicholas Colas, co-founder of research firm DataTrek.

Go deeper: Jerome Powell's attempts to please everyone have backfired

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Powell and the risk-off bull market

Jerome Powell. Photo: Alex Wong/Getty Images

The Fed’s 180-degree turn was the story of 2019, asset managers and market analysts say.

What happened: Chairman Jerome Powell and the U.S. central bank went from raising interest rates for a fourth time at the close of 2018 and giving market watchers the explicit expectation this would continue in 2019, to doing the opposite. The Fed cut rates thrice and even began re-padding its balance sheet in the last quarter of the year, bringing it back above $4 trillion.

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S&P 500 doubled its average return under past presidents during Trump's first 3 years

Photo: Nicholas Kamm/AFP via Getty Images

The S&P 500 has had a return of over 50% during President Trump's first three years in office, more than doubling the average return of 23% at the same point in a presidential term since 1928, CNBC reports.

The big picture: The market, which hit record highs across the three major indices, got a sustained lift in 2019 after Federal Reserve Chair Jerome Powell lowered interest rates three times, the first such moves since the end of the financial crisis.

Go deeperArrowDec 26, 2019

The last of the heroic technocrats

Felix Rohatyn (l) and Paul Volcker. Illustration: Aïda Amer/Axios. Photos: Wally McNamee/Getty Contributor and Ted Thai/Getty Contributor

Two giants of the postwar economic landscape died last week. The actions of Paul Volcker (1927–2019) and Felix Rohatyn (1928–2019) had profound effects on millions of Americans, and bestowed stellar reputations on both men.

Why it matters: There are, and will be, many other successful and powerful technocrats, many of them just as capable as these two paragons of austerity. But none of them are likely to receive the kind of popular acclaim that Volcker and Rohatyn enjoyed.

Go deeperArrowDec 19, 2019