Market comment 2023

[admin]

The president has been terrific at staying out of the Fed’s way, something presidents don’t always do. When the central bank raised rates last time around, President Donald Trump went berserk. He declared the Fed chair whom he himself had appointed, Jerome H. Powell, an “enemy.” Trump also repeatedly threatened to fire Powell, a legally dubious action that would have roiled markets.

It also would have compromised the Fed’s long-term ability to fight inflation. That’s because a central bank’s independence, both real and perceived, is critical to the institution’s ability to achieve price stability. The public must believe the Fed is willing to “take away the punch bowl” — that is, raise interest rates when the economy overheats — to get inflation under control. That way, expectations of further high price growth don’t take root and become self-fulfilling..

Who’s responsible for cooling inflation? Credit Biden, if not Bidenomics.