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Markets climbed a wall of worry, and the nomination of Jerome Powell as chairman of the Federal Reserve removes a significant amount of uncertainty.

it was possible that the president that Biden Lyle would choose Brainard, who was named Mr Powell’s deputy instead, and his approval process could cause trouble in the Senate. By leaving president Powell in charge That concern was dropped, meaning the policy remains on its previous, extraordinarily easy, course.


It is easy to predict the reaction of the market to remove the risk. stock and others Risky assets rise, and bonds, gold, and others Secure assets are reduced, So it was, if not to a great extent. How price reacts is one way to define an asset, and on this basis bitcoin is a risk asset, as it jumped while gold fell.

Biden Taps Jerome Powell for Second Term as Fed Chair, Turning Down Progressives

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It is unlikely that the senator will stop Mr. Powell. True, progressives dislike him, despite a focus on inequality and full employment, and leaving projected inflation as the main determinant of monetary policy. And Donald Trump had a very public disagreement with Mr. Powell, although the Fed has now reversed somewhat in raising interest rates. But last time Mr. Powell had the support of a solid majority, and the rejection of mainstream choice for chair of the Fed would upset Wall Street without helping Maine.

The market will now return to its main engagement: is Mr. Powell right to think so? Inflation is fleeting, If he is, then there is an important secondary issue: Will the economy be strong enough to allow rates to return to a sort of normalcy over the next few decades?

At the moment investors are answering yes, it will be transitory, and no, the economy will not be strong enough to bring rates back to normal.

Congratulations, Jerome Powell. Inflation should now be your top priority

The bond market is set to average more than 3% for inflation over the next five years, well above the Fed’s 2% target. But much of that is in the very near term, with investors expecting inflation to return to target over the next five years as the economy returns to its pre-pandemic normal of low growth.

Investors are betting that the economy will not grow well enough in the long run to support an increase in interest rates after real, inflation. Returns on Treasury inflation-protected securities for the next 30 years were the lowest in 2010 figures earlier this month, and the below-inflation rate remains negative for decades to come.

True or false it is not in Mr. Powell’s gift. But by the time those bonds mature, we’ll know if their Fed has managed the difficult move of preventing current inflation from reaching too high a target, while also easing the economy in an effort to roll back inflation. To avoid the common Fed mistake of slowing down.