Mr. Powell, the Chairman of the Fed, iterated his strong commitment to reducing the inflation rate. That's reassuring if its true. But actions speak louder than words and even his words are not unambiguous.
He directed some of his words at climate change -- saying that he would not be a climate change policymaker. I am not sure how the Fed can change climate, but let's not go in that direction. Perhaps what he really meant to say is that he is not going to let money grow willy nilly just because climate threated a recession. But I don't think he meant that. He also said in the same statement that he was going to "support strong job growth."
There is nothing wrong with wanting strong job growth. But Fed watchers understand that sometimes in order to get strong growth you first have to kill inflation. That is, we often have to live through some weak growth first if we are going to get strong growth later. It's kind of like living through the effects of a dose of medicine before we get better. But Doctor Feelgood might want to promise a cure without any side effects.
Markets didn't react strongly to his statement. The stock market rose a smidge and interest rates fell a bit. Not much to write home about.
But inflation rages on. After peaking at 17% mid-year 2022, the monthly inflation rate has receded. Yet in November of 2022 inflation was 7% higher than in November of the year before. There is much to ring out to get the job done.
Powell's credibility is at stake here. It won't be easy to get inflation well below that 7% momentum. I wish him luck.
