Jerome Powell Is Popular. His War on Inflation Could Change That.
The article emphasizes the possible risks from the outcome of Jerome Powell's war against inflation and how it could bring about a legacy that Jerome Powell would not like to be remembered for. Jerome Powell's administration decided to raise interest rates very quickly (the fastest rise in more than 40 years) to curb inflation in the economy recently. With the decision made by the Jerome Powell administration, the economy could be at risk.
Powell could either reduce it back to normal quickly (Back Track his plan) which would lead to what happened during the period of Arthur Burn's administration in the 1970s, or stick to his decision, which if not carefully watched, would lead to recession, just as Paul Volcker's administration in the 1980s (1982). The disadvantage of backtracking before inflation is curbed is that people expect high-interest rates and that would result to rapid price increases to linger. The disadvantage of sticking to it before inflation is curbed is that unemployment would rise rapidly because the cost of wage per labor would increase due to the high-interest rate, which then would lead to recession.
From the news article, I believe consumers and banks are most fearful of the extreme case of recession than a case of a rapid price increase, which is enough reason for Jerome Powell to backtrack his way in order to prevent a recession. But the personality of Jerome Powell, I believe Powell will not want to break track, even stating that "We will keep at it until we are confident the job is done".
In my opinion, I believe what Jerome Powell is expecting is a warning sign before he reduces interest rates, which might not happen. From the new article, during Paul Volcker's administration, the unemployment rate started to increase before the recession kicked in. But unfortunately, with the presence of hybrid and online jobs being offered, the unemployment rates would continue to decrease. The decrease in in-person jobs opportunity as a result of high-interest rates would not easily be shown in the unemployment rate. In conclusion, if Jerome Powell can get his hands on the unemployment rates of hand-skilled jobs (such as farmers, builders, carpenters, and car dealers), he can notice from there, when the spikes occur and not be fixated on the real unemployment rates which have been affected by the presence of hybrid and online jobs which fits people comfort.
https://www.nytimes.com/2022/10/31/business/economy/jerome-powell-fed-inflation.html#:~:text=That%20could%20allow%20officials%20to,in%20the%201980s%20so%20far.
