‘Continuity’ means Biden and Powell’s inflation response: Morning Brief – News Couple
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‘Continuity’ means Biden and Powell’s inflation response: Morning Brief


This article first appeared in the Morning Brief. Get your morning feed sent straight to your inbox every Monday through Friday by 6:30 a.m. ET. Subscription

Tuesday 23 November 2021

Monetary policy is becoming more political

The first part of Jerome Powell’s tenure as Federal Reserve chairman was determined by an increasingly fierce battle with the president who appointed him.

The next stage of the Powell-led central bank will be determined by its response to higher prices. And President Joe Biden – who decided on Monday to reappoint Powell in the face of pressure to change course – will now find that his political fortunes are inextricably linked to Fed policy in a way that his recent predecessors have not.

It is worth repeating that while the Fed chair is a political appointment, the distinguishing feature of monetary policy is his independence. It’s one of the reasons former President Donald Trump found himself so angry at Powell that he openly flirted with the idea of ​​getting rid of him.

Assuming Powell passes Senate confirmation, which he will by all indications, given the relatively high levels of bipartisan support he enjoys, he and the president will find themselves on the hip as aggressive economic expansion gives way to inflation.

By choosing Powell over Lyle Brainard, Biden decided the former was “the right man for the job,” Biden’s chief adviser, Jared Bernstein, told Yahoo Finance on Monday.

When the president thought about “the Federal Reserve that would implement this kind of economic policy… [people] Connected to Joe Biden — providing opportunities for low- and middle-income people and making sure Wall Street is highly regulated — has decided that Jerome Powell is the right man for the job,” Bernstein said.

However, in the midst of high inflation that is making the public increasingly unhappy and affecting Biden’s approval ratings, what happens next will inevitably be a reflection of both the men and their legacy.

Powell’s split with Trump, who has vehemently opposed the Fed’s rate hike campaign, has broken Fed policy through an uncharacteristically political lens. However, it has had the side effect of insulating the White House from the influences of independent monetary policy.

By doubling the Powell era, Biden has given tacit endorsement of the Fed’s response to COVID-19, and he will have to bear the consequences of higher prices, and how an expected rate hike next year will affect expansion.

“This means that Biden now politically owns Powell’s Fed policies and their consequences,” John Lieber and Robert Kahn of Eurasia Group wrote on Monday.

While renaming Powell was a “less risky strategy” given market expectations of continuity, Eurasia analysts wrote, “his confirmation would be a referendum on inflation.”

They added: “There will be multiple voices of protest from Republicans over the direction of monetary policy and its continued focus on ‘capital employment’ as inflation grows in 2021. Any high inflation rates between now and February will cost him more votes.”

In fact, the markets have already made a preliminary verdict on Powell’s supplement. According to Tradeweb data, the Treasury yield curve size (1, 2, 3 and 5 years) reached its highest levels in more than a year following the announcement of Powell’s renaming. Meanwhile, markets are also pricing in price increases for next year (although the exact date for that is anyone’s guess).

While it’s too early to call it a vote of no confidence, Monday’s jump in yields was in line with a somewhat consistent message that bond investors have been sending for weeks. They worry about inflation, and believe that Powell’s credibility hangs in the balance of containing those pressures.

The tenures of former Fed Chairs Ben Bernanke and Janet Yellen were marked by quantitative easing, and countless amounts of stimulus bond-buying led critics to search for inflation that never really appeared.

However, Powell will have the dubious distinction between duty to clean versus high prices — something we haven’t seen in decades. He will have to own the result of the effective and controversial policies he has implemented – as well as the 46th president he has chosen for a new term.

by Javier E David, editor at Yahoo Finance. follow him in Tweet embed

What are you watching today

Economie

  • 9:45 a.m. ET: Markit US Manufacturing PMI, Pre-November (expect 59.1, October 58.4)

  • 9:45 a.m. ET: Marquette American Services PMI, Pre-November (59.0 expected, 58.7 in October)

  • 10:45 a.m. ET: Richmond Fed Manufacturing Index, november (expect 11, october 12)

earnings

Before being put on the market

  • 6:45 a.m. ET: Burlington Stores (BURL) Expected to report adjusted earnings of $1.30 per share on revenue of $2.23 billion.

  • 7:00 a.m. ET: best buy (BBY) Expected to post adjusted earnings of $1.96 per share on revenue of $11.69 billion.

  • 7:30 a.m. ET: dick sporting goods (DKS) Expected to report adjusted earnings of $2.00 per share on revenue of $2.51 billion.

  • 7:30 a.m. ET: dollar tree (DLTR) Expected to report adjusted earnings of 95 cents per share on a return of $6.44 billion

  • 8:00 a.m. ET: American Eagle Outfitters (AEO) Expected to report adjusted earnings of 61 cents per share on revenue of $1.23 billion

after market

  • 4:05 p.m. ET: nordstrom (JWN) Expected to post adjusted earnings of 55 cents per share on revenue of $3.48 billion

  • 4:05 p.m. ET: Autodesk (ADSK) It is expected to report adjusted earnings of $1.26 per share on revenue. $1.12 billion

  • 4:05 p.m. ET: HP Inc (HPQ) Expected to report adjusted earnings of 88 cents per share on revenue of $15.43 billion

  • 4:15 p.m. ET: VMWare (VMW) Expected to report adjusted earnings of $1.54 per share on revenue of $3.12 billion.

  • 4:15 p.m. ET: Gap (GPS) Expected to report adjusted earnings of 50 cents per share on revenue of $4.42 billion

  • 4:25 p.m. ET: Dell Technologies (Del) Expected to report adjusted earnings of $2.23 per share on revenue of $26.81 billion.

Policy

  • To keep the focus on inflation, President Biden He gave a speech today on “The Economy and Lowering Prices for the American People” before leaving for the Thanksgiving holiday. The speech comes a day after Biden emphasized the Federal Reserve’s leadership on the need to tackle inflation.

important news

Samsung picks Taylor, Texas, for $17 billion chip factory: WSJ [Reuters]

Zoom shares dip after results as Wall Street becomes wary about growth [Reuters]

The United States is preparing to unveil an emergency oil issuance in an effort to combat high prices [Reuters]

AmEx is terminating some employees for improper promotion of certain products [Reuters]

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