Financial Sense: Federal Reserve’s Powell faces mounting pressure as inflation concerns rise
By Jason Glisczynski
The U.S. Federal Reserve’s Chairman, Jerome Powell, is facing increasing pressure as inflation concerns continue to mount.
Despite the central bank’s commitment to keeping interest rates low until the economy fully recovers, investors are worried that the Fed may need to take action sooner rather than later to curb inflation.
Inflation Pressures Mounting
The consumer price index (CPI) surged 0.6% in January, its largest increase in over four years. This follows a 0.4% rise in December 2020, bringing the total increase over the last 12 months to 1.4%. These figures have raised concerns that inflation may be higher than expected in the coming months.
In addition, rising commodity prices, particularly for oil and gas, are also putting pressure on inflation. The pandemic has disrupted global supply chains, causing shortages in many goods and services, which is driving up prices.
The Fed has consistently stated that it will maintain its accommodative monetary policy until it is confident that the economy has fully recovered. However, some investors are worried that inflation may force the central bank to change course sooner than expected.
While the Fed has not yet signaled any changes to its policy, Powell’s recent comments have raised some concerns. In a recent speech, he stated that the Fed would be patient in adjusting its policy, but added that it would act if necessary to keep inflation under control.
If the Fed were to raise interest rates in response to inflation, it could have significant implications for the economy. Higher interest rates would make it more expensive for consumers and businesses to borrow money, which could slow down economic growth. However, if the Fed waits too long to act, inflation could spiral out of control, which would also have negative consequences for the economy.
In conclusion, Jerome Powell and the Federal Reserve are facing mounting pressure as inflation concerns rise. While the central bank has committed to maintaining its accommodative monetary policy, investors are worried that inflation may force the Fed to change course. It remains to be seen what actions the Fed will take in response to these concerns, but it is clear that they will need to tread carefully to avoid damaging the fragile economic recovery.
Depending on its actions, the economy could experience significant changes, making it crucial for the Fed to carefully consider its options.
Jason Glisczynski is co-owner and principal advisor for Silvertree, LLC. Investment Advisory Services offered through Brookstone Capital Management (BCM) LLC, a Registered Investment Advisor. Silvertree, LLC and BCM are separate companies. Visit www.silvertreeplan.com for more information.