Every Four Years, Overeager Young Journalists Attempt To Trap Powell In A Jack Nicholson Moment

By Eric Peters, CIO of One River Asset Management

“We’re always going to do what we think is the right thing for the economy,” said Jerome Powell, annoyed, but classy as always.

“It’s hard enough to get the economics right here,” he explained, swatting away the pesky reporter with a bit of false modesty.

Every four years, overeager young journalists attempt to get the Fed Chairman to admit the institution is influenced by presidential politics. They long for their moment of glory, a hero-nerd’s version of the “You can’t handle the truth” interrogation of Jack Nicholson by Tom Cruise in A Few Good.

“This is my fourth presidential election here,” said Powell. “Read all the transcripts and see if anybody mentions in any way the pending election,” he said, as if that matters.

Everyone in Washington is obsessed by the election. And from what I hear, nearly all are as determined to do everything possible to deny Trump a second term, as they are repulsed by the Democrat’s inexplicable failure to replace Biden on their ticket.

The Federal Reserve’s twelve voting members are just as capable of weighing the effect of their decisions on the election without explicitly mentioning it, as they are at considering the impact of US monetary policy on the Bank of Japan’s increasingly tenuous situation without talking about it directly.

So, for instance, the Bank of Japan intervened massively this week to stem the yen’s collapse, and this quite obviously was on Powell’s mind when he reassured markets that the Fed is not considering further rate hikes, which would intensify downward pressure on the yen.

A disorderly decline in the yen would force the Bank of Japan to hike rates substantially, which would cause utter havoc in global stock and bond markets.

The Fed will do whatever necessary to prevent this ahead of November’s election. And a stock market crash this autumn would pressure Powell to slash rates, but he really can’t with US inflation on the rise.

And this quandary would itself cause market panic. But you see, no one need discuss any of this in a Fed meeting, because everyone but overeager young journalists already knows it.