Posted 1/26/2024, 11:00:00 AM
Powell Shifted Fed Policy After Reappointment, Raising Questions About Political Motivations
- Powell kept interest rates low and expanded the Fed's balance sheet to almost $9 trillion to get reappointed as Fed Chair.
- Once reappointed, Powell abruptly raised rates aggressively and reduced money supply to fight inflation.
- Powell likely delayed these moves to avoid economic disruption that could have threatened his renomination.
- Powell's future now depends on Biden's reelection, giving him incentive to boost growth in the short-term, despite long-term risks.
- Like previous Fed Chairs, Powell is susceptible to political incentives that have contributed to repeated boom-bust cycles.