On the surface, it seems calm, but in reality, it is constantly paddling under the murky water.

Written by: Li Xiaoyin, Wall Street Journal

Powell is caught in a triple dilemma of economic crisis, political pressure, and internal divisions.

On March 18, Nick Timiraos, known as the "new Federal Reserve correspondent," published an article in The Wall Street Journal, deeply analyzing the challenges faced by Federal Reserve Chairman Powell.

The article points out that with only one year left in Powell's term, he is facing the most complex challenge of his career: on one hand, there is the threat of tariffs that could lead to stagflation, and on the other hand, there is the aggressive political pressure from the Trump administration. More concerning is that his 18 colleagues on the policy committee are heading in completely different directions.

This means that Powell needs to maintain the independence of the Federal Reserve amid trade wars and potential policy interventions, while also balancing the differing voices within.

Timiraos likens Powell to a "duck": calm on the surface, neither dovish nor hawkish, but constantly paddling under the murky water.

Rising Threat of Stagflation

Timiraos's article begins by highlighting the core dilemma faced by Powell: the threat of economic stagflation.

The article points out that the rise in tariffs due to the trade war could push up prices, while economic growth may stagnate or slow down as a result. This forces Federal Reserve officials to make a difficult choice between lowering interest rates to stimulate demand or maintaining high rates to curb inflation.

The article cites the views of GlobalData TS Lombard economist Dario Perkins, who stated:

"If the Federal Reserve cuts rates now, it is likely only because the economic situation has worsened."

This statement accurately summarizes the dilemma Powell faces—he must find a balance between controlling inflation and maintaining economic growth, or the Federal Reserve will find itself in a bind.

Timiraos indicates that the risk of inflation reigniting is accumulating: a decrease in immigration and government cuts may affect labor supply and demand, while significantly raising tariffs could create "the worst combination of economic stagnation and rising prices."

The article also specifically mentions the Federal Reserve's missteps in responding to post-pandemic inflation in 2021.

At that time, the Federal Reserve believed that rising prices were "transitory," only to be forced to tighten policy and raise rates sharply. This "cautionary tale" has made Powell and his colleagues more cautious in policy-making and more attentive to the impact of trade wars on inflation.

Timiraos believes that today, the new Treasury Secretary suggests that the Federal Reserve should view tariff-induced inflation as a temporary phenomenon, but this could be a dangerous suggestion.

Trump's "Disruption" of Independence

Compared to Trump's first term, the political pressure faced by the Federal Reserve now may be greater.

Although the Trump administration claims it will not interfere with interest rate policy, its actions seem to indirectly threaten the independence of the Federal Reserve.

According to the article, Kevin Hassett, former director of the National Economic Council under Trump, criticized the Federal Reserve's handling of inflation issues in an interview.

An executive order issued by the Trump administration last month granted the government oversight of the Federal Reserve's regulatory agenda, although it exempted monetary policy, the execution remains ambiguous, indirectly limiting the Federal Reserve's independence.

More concerning is that Trump's Justice Department is seeking to overturn a legal precedent established in 1935 that protects the independence of regulatory agencies. If this precedent is overturned, it would significantly weaken the Federal Reserve's autonomy, making it more susceptible to political interference.

Colleagues with Different Dreams

The challenges Powell faces come not only from external sources but also from internal ones.

Timiraos points out that the positions of FOMC members are becoming polarized, with some former "doves" turning into "hawks," and vice versa.

The article also specifically mentions two Federal Reserve governors: Waller and Bowman.

Waller, seen by some as a potential successor to Powell, has recently shown a more "dovish" stance on interest rate cuts. Last December, Waller used a Trump-style metaphor to describe the Federal Reserve's fight against inflation:

"I feel like an MMA fighter, choking inflation in a headlock, waiting for it to tap out."

Bowman, nominated as the Federal Reserve's Vice Chair for Supervision after Trump took office, has publicly opposed the Federal Reserve's interest rate cut policy.

These differing positions and political ambitions make it necessary for Powell to be more cautious in policy-making and increase the difficulty of coordination within the Federal Reserve.

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。