US Federal Reserve Chair Jerome Powell will speak at a press conference on May 7, 2025, following a two-day meeting of the Federal Open Market Committee on Interest Rate Policy in Washington, D.C.
Kevin Lamarck | Reuters
History suggests that the nickname for President Donald Trump’s new “too late” Federal Reserve Chairman Jerome Powell, who would have been the least alone, would likely come true if he did.
After all, central bank leaders have a long history of reluctant to raise or lower interest rates.
Faced with the bull threat of the 1970s, Arserusans are keeping the rate down before they show that they are not criticising Alan Greenspan, who has not responded quickly enough to the dot-com bubble in the 90s, or “containment” of Benbernanke’s subprime home prices and that they are not criticised before showing the financial obstacles of 2008.
Therefore, some economists believe Powell, who faces a set of challenges against the twin goals of full Fed employment and low inflation, is likely to wear a label “too late.”
In fact, many of them think that Powell has nothing to do now.
“Historically, I’m going back and looking at the Federal Reserve, and I’m going back to the ’70s. The Fed is always lagging behind in both ways,” says Dan North, senior economist in Allianz Trade North America. “They tend to wait. They want to wait so they don’t make any mistakes. And by the time they do, it’s usually too late. The economy is almost always in a recession.”
However, he said that given the mix of volatile policies, Powell has few options other than sitting closer without being more clear, as Trump’s tariffs threaten both growth and inflation.
Powell harbors threats to both sides of the Fed’s mandate, saying, “That’s why he’s doing the right thing at the moment, and that’s nothing, so he’s nothing,” North said.
Trump wants a cut
Trump said the economy will likely work no matter what the Fed does, but he has recently bagged the central bank to cut interest rates, claiming inflation has been killed.
In the true social post after this week’s Fed decision, Trump declared “too late” Jerome Powell is a fool and has no clue.” The president declared that there was “virtually no inflation,” and that this applies to March, at least when the Fed’s preferred inflation gauge had changed for the month.
However, the president’s tariffs are almost a month ago, so they are not yet felt in the real economy.
Recent economic data shows no surges in prices or perceptible slowdowns in economic activity. However, the survey shows growing concerns in both the manufacturing and services sectors, but consumer sentiment is sour, with almost 90% of S&P 500 companies mentioning tariff concerns over quarterly revenue calls.
However, at a press conference after this week’s meeting, Powell reiterated his confidence in what he called a “solid” economy and “labor market that matches the biggest employment.”
No “first” cut
The 72-year-old Fed chair also rejected the idea of a preemptive speed reduction, despite sentiment survey data showing current conditions.
“Powell provided two reasons why he wasn’t in a hurry. The first – “There’s no real cost to wait” is something he can live to regret,” said Krishna Guha, head of Global Policy and Central Bank Strategy at Evercore ISI, in his client notes. “Second – “I don’t know what will happen right” – makes more sense. ”
Powell has his own specific history of hiking and delaying the Fed, reluctant to hike when inflation began to surge in 2021. He and his colleagues labeled the episode “Transitory.”
“If you’re waiting for the labour market to see if it should cut fees, by definition they’re too late,” said Joseph Lavolguna, chief economist at SMBC Nikko Securities and a senior economic adviser to Trump in his first term. “I don’t think the Fed is positive enough.”
Certainly, if the Fed uses the labour market as a guide, it is almost certainly behind the curve. The old Wall Street adage says that when the recession comes, “the labor market knows last” and history is generally fairly consistent that no job losses begin after the recession begins.
Lavorgna believes the Fed is ham down by its own history and misses this call as policymakers have failed to try and make the impact of tariffs into a game.
“I don’t know if it’s too late until it’s too late,” he said. “Economic history and current market pricing suggest that there is a real risk that the Fed will be too late.”
