The student media organization of California State University Northridge

Daily Sundial

The student media organization of California State University Northridge

Daily Sundial

The student media organization of California State University Northridge

Daily Sundial

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Jerome Powell: The fate of our economy is in his hands

Dilok –
Image courtesy of Adobe Stock.

We have narrowly avoided a severe inflation crisis, but the struggle to prevent dire economic conditions for Americans is ongoing. All eyes are on Jerome Powell, the Federal Reserve chairman, who has faced a wide variety of reviews for his performance in his coveted position.

Powell has become a central figure from Wall Street to Main Street in discussions regarding our future. During the inflation surge of late 2021 and early 2022 amid a white-hot market, fears of a recession reminiscent of 2008 loomed large.

Powell, affectionately dubbed “J-Pow,” emerged as a beacon of hope, ensuring circumvention from an inflationary disaster. The essential strategy was to foster a ‘soft landing,’ enacted by monetary policy, the main economic tool of the Federal Reserve, in order to gracefully reduce inflation and tighten the money supply.

With many ups and downs since then, inflation has subsided from a high of over 9% in June 2022 to a now more manageable 3.3% at the end of 2023. Methodically raising the discount rate, the interest rates at which the Federal Reserve lends money out to banks, and pumping fewer dollars into the economy allowed the proposed ‘soft landing’ to take place.

With inflation nearing the 2% target for a healthy growing economy, investors are currently engaged in a debate about the number of cuts and their timing. Despite expectations of three rate cuts in 2024, the market reacted negatively, as investors anticipated more aggressive cuts, mirroring the rate hikes of 2022.

The rate at which these cuts occur is not the sole concern on Wall Street. Many are eyeing the presidential election taking place this November, adding another layer of complexity to the already daunting task. The Democratic Party and President Biden are advocating for significant rate reduction, aiming to claim credit for stimulating economic growth.

Conversely, Republicans led by GOP frontrunner and former President Trump anticipate a landslide victory in 2024 and prefer minimal rate cuts now, allowing further reductions once they regain the White House, enabling them to, like the Democrats, claim credit for stimulating economic growth.

Amid the political stratagem, Powell is steadfastly ignoring the game of politics, and is aiming for three cuts in 2024, cleverly ignoring both parties’ desires while finding the middle ground between the two.

At this critical stage in America’s economic stability, Powell most definitely has the spotlight glaring at him. Whether his strategies lead to success for the economy or cause unwanted tumult is a topic of discussion amongst investors where only time will tell.

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