I study markets for a living. I’ve never been this worried before.
by Callie Cox
Business Insider
I do not envy Federal Reserve Chairman Jerome Powell right now.
The 72-year-old former investment banker and longtime economic policymaker stands at a precarious crossroads. As the Fed chairman, his job is to achieve two goals: price stability and full employment. Usually, the trade-off between these two aims is clear, but these days, Powell has to perform a difficult balancing act. On the one hand, he needs to keep prices in check as the White House enacts dramatic tariffs on our biggest trading partners. On the other hand, he has to try to slow the uptick in the number of jobless Americans.
How Powell addresses this conundrum will have massive effects on the American economy. Get it wrong and the US could get stuck in the dreaded “stagflation,” a condition in which inflation is taking off at the same time the job market is getting weaker. It’s nearly impossible to simultaneously address the “stag” and the “flation.” Policymakers obviously care about both sides of the dual mandate, but given the central bank’s blunt tools, equal treatment by the Fed isn’t really possible.