How Jerome Powell's tone on inflation has changed

Data: Axios analysis of Powell's speeches and interviews; Graphic: Andrew Witherspoon/Axios

Fed chairman Jerome Powell has spoken a lot about the risk of inflation overshooting its 2% target, but only recently has he discussed the risk of a persistent undershoot.

Why it matters: This "reinforces a generational change in Fed thinking from fear-of- inflation-too-high to fear-of-inflation-too-low," as Tony Dwyer, chief market strategist at Canaccord Genuity, said in a tweet.

Between the lines: Under usual circumstances, the Fed's two mandates work against each other: Maximizing employment usually is cover for the Fed to cut rates, while the price stability mandate has been used to justify rate hikes.

  • Over the last several years, the Fed has been raising rates despite inflation falling below target. Yellen made the case that the Fed could raise rates "more slowly," should weak inflation persist.
  • It's not that the Fed couldn't have made the case for a cut based on soft inflation readings — they just didn't. That's much easier now that interest rates have come up from 0%.