Jerome Powell Will Face a Very Different Economy in a Second Term

Jerome Powell Will Face a Very Different Economy in a Second Term

Over his first term in office, Jerome Powell became arguably the most dovish chairman in the Federal Reserve’s modern history, giving priority to full employment in an era in which inflation seemed extinct. In his second term, he may have to execute the reverse: giving priority to inflation at the risk of sacrificing jobs.

The pivot could be painful for both Mr. Powell and President Biden. On Monday, Mr. Biden praised Mr. Powell for his commitment to “maximum employment” so that “American workers get steady wage increases after decades of stagnation, and…the benefits of economic growth are broadly shared.” Yet economic conditions have been substantially reordered in just the past year. Inflation, at 6.2%, is its highest in 31 years. While employment remains 4.2 million below its pre-pandemic peak, labor shortages are widespread, and wage growth is accelerating. All that threatens the Fed’s 2% inflation target.

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Rachel Meadows

Rachel Meadows

Trending topics news writer who enjoys cooking, walking her dog and travel.

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