J.W. Mason writes in Barron’s that there was something tragic about Federal Reserve Chair Jerome Powell’s latest press conference…(Barrons)
Energy prices in particular, which seemed to have stabilized by the end of 2021, have marched upward since Russia’s invasion of Ukraine. This contributes, perhaps more than anything else, to the sense of panic around inflation. And yet as the chairman says, “Gas prices are … not something we can do anything about.”
What the Fed can do is discourage new housing construction (housing starts fell 14% in May), in the long run making housing more expensive, not less. What the Fed can do is shift bargaining power in the labor market from workers to employers, causing wages to fall even further short of the cost of living. What the Fed can do, if it pushes hard enough, is tip the economy into recession.