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Thndr Claps » U.S. Claps » Economy 🏢 » Fed Chair reelected for 2nd term🏛️

Fed Chair reelected for 2nd term🏛️

by Shams Abbas
May 12, 2022

The Clap

Federal Reserve Chairman Jerome Powell will serve a second term after the Senate approved his reelection.

More on Powell

Powell faced two crises in his first term as Fed chairman, 1) the COVID-19 pandemic, & 2) decades-high inflation. Critics of Powell argue the Fed was a few months too late in raising interest rates & decreasing its balance sheet.

More from Powell

In an interview, Powell said that achieving price stability is his top priority, as “the economy doesn’t work for anybody without price stability.”

He added that achieving price stability will likely come with some pain to the economy, hinting that a so-called “soft-landing” might be out of the cards.  

Why? 

With the high demand for workers, wages are increasing (but not as much as inflation). According to Powell, there are currently two job openings for every unemployed person.

The trick here is to raise rates just enough to tame inflation but not significantly increase the unemployment rate. When interest rates rise, borrowing gets more expensive & consumer spending/demand declines. This could lead to employers having to lay off workers to cut-down costs.

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