Jerome Powell’s Austenian Economics
Perhaps Jerome Powell has learned a lesson in prudence. jane austin.
in her novel persuasion, Austen tells the story of Anne Elliot, who waits for the right moment to put her love for Captain Wentworth into action. Her early refusal to marry Wentworth is not a rejection of his virtues, but evidence of her obsession with the wisdom of her patience.
Mr. Powell seems like a reluctant Anne these days.
“our confidence is growing. “We just want to have a little more confidence before we take the very important step of starting to cut rates,” Powell said.
the important thing is, Fed decision to start cutting interest rates It’s a lot like deciding to get married. It can be reversed, but it involves considerable hassle, some degree of financial hardship, and often reputational damage.
data over story
The fall in inflation last year lifted many spirits and eased calls for imminent interest rate cuts. Disinflation is like many promising suitors, but no track record yet. As we have consistently maintained, Significant reasons to doubt whether disinflation really has staying power. Why rush into marriage?
A strange form of argument in favor of rate cuts has emerged in recent days. The idea seems to be that the Fed should ignore recent signs of a resurgence in inflation to avoid a potential future recession. If the Fed waits too long to cut rates, it will be too late.It’s better to launch Pre-emptive war against a potential recession.
However, this Triumph of narrative over data. Even leading economic indicators no longer portend a recession this year. Those who discount bad data on inflation, which is now called “one week” (actually it’s months, but never mind), are most likely to base their policy decisions on zero weeks of bad data on employment. You can’t expect anything like that. In fact, the labor market is so strong that you could say we’ve had a negative jobs report for weeks, but time doesn’t work that way.
Like Anne’s decision to wait to marry Wentworth, the choice to postpone the rate cut is not a choice to do nothing in the face of immense risk, but a choice to keep trying. Deeper assurance of stability. Austin’s advice (from the page below) persuasion The best decisions seem to come from waiting until the right conditions are in place.
Wait for convincing disinflation
Powell’s reference to wanting “more confidence” before acting can be seen as a nod to this Austenian perspective.it’s about asking Level of certainty in the economic outlook We aim to go beyond immediate data to gain a deeper understanding of the trajectory of the economy. This will require patience, and a willingness to wait for economic realities to further develop, ensuring that the decision to cut rates, when ultimately taken, is based on a comprehensive assessment of the economic climate. There is a need to.
We find ourselves witnessing this economic courtship unfold. There, disinflation is flying around from across the room, and the Fed is waiting with discerning eyes for any sign of real, lasting commitment. Mr. Powell is essentially asking the economy to prove his commitment and show that it can be a partner in economic creation. A more stable future than a fast-paced romance.
