Powell’s Bucket Of Cold Water

Talk about a bucket of cold water. As if Jay Powell was not clear enough, the Fed whisperer at the Wall Street Journal, Nick Timiraos, made it official.

When it comes to the ballyhooed Pivot, the Fed Chairman’s message was stark: Fuggedaboutit!

“The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” Mr. Powell told the Senate Banking Committee.

Then came the dreaded higher for longer words:

“If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.”

As they used to say in the cowboy westerns, “them there’s real dangerous words, buster!”

But that’s not owing to the implication the Fed chairman has gotten the sound money religion. Actually, he’s just spouting from the same old paint-by-the-numbers Keynesian model. He’s merely threatening to twist the interest rate dials a tad harder because the monthly incoming data hasn’t been all that consistent with the model.

In fact, since the Fed’s last meeting hiring, spending and inflation allegedly turned out stronger in January than expected, while data revisions for earlier months purportedly showed inflation and labor demand didn’t soften as much as initially reported.

……the breadth of the reversal, together with revisions to previous data, “suggests that inflationary pressures are running higher than expected at the time of our previous [rate-setting] meeting,” Mr. Powell said.

So Powell suggested the Fed heads would pay very close attention to two specific upcoming reports— Friday’s monthly jobs report and next week’s report on inflation.

That is to say, these clowns apparently think that the massively contorted, goal-seeked and constantly revised incoming monthly data is solid enough to serve as a roadmap to macro-manage the nation’s $26 trillion economy. And do not take our word for it—the man himself made it very clear this AM:

“We’re looking at a reversal, really, of what we thought we were seeing to some extent,” said Mr. Powell.